Post-election surge: USD strength and market shifts amid central bank rate cuts

Sal Provenzano TraditionData

Since the U.S. Presidential election, we’ve witnessed a significant rally in US equity markets, and USD appreciation against other major currencies. Analyzing data points prior to the US election results, beginning on Monday, Nov 4^th, into early US morning on Wednesday, Nov 6^th (when the Trump victory was confirmed), and ending the following week on Tuesday, Nov 12^th, the Dow Jones Industrial Average (DJIA) was up 6.74%. During that one-week period, the DJIA low was on Nov 4^th, of 41,678, followed by high on Nov 11^th of 44,486. During that same timeframe, EURUSD reached a high of 1.0937 on Nov. 5^th and a low on Nov 12^th of 1.0595. EUR depreciated, against USD 3.66%. Additionally, USDJPY reached a low of on Nov 5^th of 151.30 and a high on Nov 12^th of 154.92, representing a 2.4% USD appreciation against JPY.

Additionally, two major central banks continued their rate reduction monetary policies, as inflation continued its downward trend. Last Thursday, Nov. 7^th, both the Federal Reserve (Fed) and the Bank of England (BOE) announced .25% interest rate cuts. The Fed’s decision brought the benchmark federal funds rate down to a range of 4.5% - 4.75%. The BOE reduced its key interest rate to 4.75% from 5%.

We’ve also witnessed longer dated US bond yields on the rise. The increase has pushed borrowing costs on 30-Year fixed mortgages higher, over the past couple months to 6.80%, as 10-year US Treasury Bonds are used as the benchmark for mortgages.

Prior to the election results, there was a growing opinion that a series of smaller rate cuts (.25% each) through 2025, would result in a federal funds rate of approximately 3.5%, by end of 2025.

The attached graphs illustrate USD appreciation against other G-4 currencies (EUR- Euro, GBP – British Pound and JPY- Japanese Yen). The data is compiled from TradtionData’s end of day New York, FX spot-mid prices. You can see USD appreciation from the Nov 1^st – Nov 12^th, as well as USD spike on Nov 6^th; the day after the election. GBP edged higher on Nov 7^th after the rate cut announcement, pointing to a continued downward trend in inflation.

Author

Sal Provenzano

TraditionData

Sal Provenzano Is the FX Product Manager for the TraditionData business and has been tasked with shaping the future of the FX product range.

AUD/USD struggles below mid-0.7000s ahead of Aussie jobs data, Trump-Xi summit

AUD/USD consolidates near its lowest level since August 7, trading below mid-0.7000s during the Asian session on Thursday ahead of Australian jobs data and the Trump-Xi meeting. Meanwhile, Fed rate hike bets keep US bond yields elevated near multi-year highs. This, along with geopolitical risks, helps the US Dollar preserve overnight gains to a nearly two-month peak and caps the currency pair.

USD/JPY stands firm near mid-157.00s, close to two-week high

USD/JPY hovers around mid-157.00s in the Asian session on Wednesday, near two-week highs touched last Friday as the BoJ's dovish rate hike continues to undermine the Japanese Yen. Meanwhile, the US Dollar remains firm amid the Fed's hawkish stance, adding support to the pair, though JPY intervention fears cap further gains. Markets pay little heed to the completion of the round of US-Iran indirect talks ahead of Trump-Xi meeting.

Gold falls to weekly troughs below $4,300

Gold rapidly leaves behind two daily upticks in a row and comes under heightened downside pressure midweek. Indeed, the precious metal breaches below the $4,300 mark per troy ounce to reach weekly lows amid the marked recovery in the US Dollar and the generalised upbeat tone in the US money market.

Australia unemployment rate expected to remain unchanged at 4.5% in August

Australia will release the August monthly employment report on Thursday at 01:30 GMT. Ahead of the announcement, analysts expect the country to have added 20K new jobs in the month, while the Unemployment Rate is expected to remain steady at 4.5%. The Australian Bureau of Statistics (ABS) report is also expected to show that the Participation Rate stood at 66.9%, unchanged from the previous month.

Ethereum takes a breather at $2,700 as activity, leverage stays calm

Ethereum declines 3% below $2,700 on Wednesday, as the crypto market takes a breather from recent price surges. Open interest, which measures the total worth of unsettled contracts in a derivatives market, has remained calm in ETH terms since the late August short squeeze that pushed prices above $2,000.

BoJ Recap: Not as hawkish as expected

The Bank of Japan (BoJ) raised its short-term interest-rate target to 1.25% from 1.00% in a 7-2 vote, marking another step in the normalisation of monetary policy and widely matching what everyone has been expecting for weeks.