U.S. Dollar Halts Rally as Markets Ease on Post-Election Surge

USD

The U.S. Dollar is trading in mixed ranges, remaining relatively strong after reaching a decade-best performance last week. The fast pace of appreciation may be slowing down as major banks and traders revise their economic outlooks for 2017. Some analysts believe the “Trump Trade” effect that has boosted markets in weeks following the presidential election is worth reviewing as overhyped. Potential for major spending by Trump’s future administration rallied equities and the greenback, but now there are doubts over the short-term effects. 

The prices of metals such as zinc are up on what could be speculation of heightened demand to come from China. AUD and NZD are recovering as a result, while South African Rand improved on the likelihood of current President Jacob Zuma being ousted by government officials. His administration leaving is welcome news as his reign has been marred by scandal and corruption. 

Oil prices are on a three-day slide as the OPEC deal to curtail production is at risk of not occurring. MXN and CAD remain near multi-month, as well as record, lows against the buck.

GBP

The Pound fell by over half a percent as European Central Bank President Mario Draghi gets ready to speak to the EU’s parliament about the effects of Brexit. Although some key economic indicators have shown resilience, the Pound has continued to fall based on the uncertainty surrounding the full reality of separation.

Once it commences, the official Brexit process may bring other yet unforeseen consequences. In addition, Policy divergence is likely to keep downward pressure on the GBP/USD pair as we enter the last month of 2016.

JPY

The Yen rose against the dollar falling along with Treasury bond yields. These yields had surged based on the belief that a Trump presidency could lead to serious inflationary growth. Now that traders are pricing in a hike by the Fed and the market rally has submerged, the Yen is no longer rapidly depreciating. Throughout the previous three weeks, the greenback appreciated at its fastest level against the Yen since 1995.