Expecting the pound to soar on a Trump victory? Here’s why it’s looking flatter than you might have thought
When Florida looked to leaning towards a Trump victory at around 2:30am last night the pound began to climb.
The dollar – at the other end of the equation – started to slide.
The dollar's slide seems to have halted for now though the pound's rise has also gone into reverse.
The pound at one point breached $1.25, the highest its been since early October. Since those highs last night it has fallen back.
(Source: Bloomberg)
The pound, it seems, is not safe enough for investors bailing out of the US.
Following the election result RationalFX chief exec Paresh Davdra said:
Markets initially pushed on higher through to the mid 1.25s when it became apparent that Trump was leading the race, however since the news of Trump being elected we are seeing a bout of USD strength causing GBP/USD to move lower to the levels we saw towards the close yesterday.
The best performer from the election result has by far been save haven assets such as gold and JPY as market participants opted to put funds in more stable assets. The aftermath of the result over the next few days will be prove to be a very interesting time for markets.
The flight to safety has sent the euro, Japanese yen, Swiss franc and gold higher. Gold prices surged four per cent this morning as a Trump victory looked more likely. Analysts have suggested it could continue to climb as markets come on line through out the day.
Geoffrey Yu, head of the UK investment office at UBS Wealth Management, said:
Sterling is underperforming other currencies, such as the yen, swiss franc and euro, against the dollar. It therefore cannot really be considered a safety play today. This could, however, very marginally reduce headwinds for the FTSE100.
Spreadex analyst Connor Campbell said:
Gold was understandably the rare-winner this morning, rising 2.5 per cent with plenty more growth likely to come in the next few days and weeks. The dollar, meanwhile, is being hammering by the euro, losing around one per cent, but isn’t faring too badly against the Brexit-blighted pound, falling a mere 0.2 per cent.
It is hard to really know what to say about Trump’s victory. 2016 now officially seems to be the year of hate and uncertainty, the global economy plunged into darkness where little is known about its future. One thing does seem to be for certain; there is no way Yellen and co. will hike rates in December.
While HSBC's currency analysts say Donald Trump's victory would see "further aggressive" selling of the Mexican peso and emerging market currencies.
The medium-term implications will hinge on the actual scale and nature of policy implementation.