Veterans Day & the Strength of the US Dollar
Hello and welcome back. Happy Veterans Day to all of our US friends.
Any positioning of a week ahead to match last week would only leave readers disappointed, so we will try to add a dose of realism to what’s ahead in the next five days. Last week heralded the conclusion of a series of, quite frankly, odd public performances that split opinion around the world. Allegations of foul play and difficulty in assessing whether performances were genuine or some sort of circus act trended across social media. On this occasion, we’re not talking about the US election campaign but the retirement of ‘Raygun,’ the now infamous Australian break-dancer who competed in this summer’s Olympics. We’re genuinely disappointed we won’t see her in L.A. in 2028!
The spectacle of last week’s US election outcome was somewhat more orderly than many expected, as was the market reaction. By the end of the week, the ‘Trump trade’ seemingly began to build momentum again, with the dollar finishing stronger and equities remaining buoyant. As Trump begins to select his cabinet, the world will watch for initial indications of the conviction behind his campaign policies. The rumored re-appointment of Robert Lighthizer, a key architect of the aggressive tariffs used by the US during his first term, suggests Trump will deliver on his campaign promises. This is the overarching theme right now, with geopolitics beginning to bubble post the first Trump and Putin conversation overnight, which brings the situation in Ukraine into focus.
As the prospect of tariffs dominates, it is pushing the potential for lower global growth and higher US inflation to the top of the agenda. As a result, the dollar is beginning to regather momentum, keeping EUR/USD close to four-month lows and GBP/USD not far behind on the 1.2900 handle.
Sterling has been a bit of a bystander in the last seven days, and initially, it appears it may be favored versus the euro as an initial reaction to the Trump victory (the UK being a services-led economy means it’s somewhat insulated from potential tariffs on goods). Tariffs and the developing story of Europe’s political uncertainty and vulnerability to a hawkish Trump administration will likely roll into this week, with economic data gradually coming back into perspective. Starting with Europe, German Chancellor Olaf Scholz has suggested a snap election could take place imminently following the collapse of the coalition government in Germany. This is bad timing for Europe, as expected tariffs will make it more difficult for the Eurozone to remain competitive. Consequently, political uncertainty will leave a deep scar on confidence.
GBP/EUR continues to climb higher and this morning has broken the key technical level of 0.8300 in the more commonly traded EUR/GBP in institutional markets (1.2049 in GBP/EUR). German inflation, the ZEW survey, and UK jobs data will set the tone tomorrow morning for where GBP/EUR heads this week.
In the US, despite it being Veterans Day today, which will lead to light trade, the week ahead looks packed with potential market-moving events. Alongside one eye remaining firmly on Washington (or Mar-a-Lago) for guidance on the formation of key Trump officials in his cabinet, investors will be anticipating inflation data from the US on Wednesday and comments from Fed officials, including Chair Powell. Fed member Kashkari was on Fox News this weekend downplaying concerns around potential friction between the Fed and Trump. Diplomacy will play a key role here! Retail sales are also released from the US on Friday. Domestically, following the jobs numbers tomorrow morning, we will receive GDP figures on Friday, which will come into sharp focus given the reliance on growth to justify the fiscal policies imposed by Labour.
Market rates
GBPUSD 1.2902
GBPEUR 1.2054
EURUSD 1.0704
Brent Crude 73.87
Bitcoin $80,972.00
FTSE 8072
Upcoming events
Tuesday
Wednesday
领英推荐
Thursday
Friday
Monthly chart
CPD Webinar: An Introduction to Currency Risk Management and Strategy
Join us on Wednesday, 11th December from 12:00 to 13:00 (GMT) for a session covering influences on currency markets, identifying and measuring currency risk, strategy creation, and a case study with live Q&A. Earn an accredited CPD certificate and CPD points upon completion.
From Vision to Reality: Our CEO’s Journey
Our CEO, James Arnold , recently appeared on the Gift-Cast podcast to discuss Birchstone’s inspiring journey to date. He shares insights into our unique culture and how we’ve harnessed technology to stand out in the industry. Listen in for an insider’s perspective on the values that drive us forward.
Like what you're reading?
Subscribe to get this delivered straight to your inbox.