Investors sold sterling and stocks in Europe and Asia on Monday, seeking shelter in gold and the Japanese yen as uncertainty over Britain's departure from the European Union and the policies of U.S. President-elect Donald Trump curbed appetite for risk.
The heightened hard Brexit fears have triggered a steep Sterling selloff during the early trading hours of Monday with the British pound/U.S. dollar (GBP/USD) currency pair tumbling to a fresh three-month low at $1.1983.
The defining moment of the week for the U.S. Dollar came as the first press conference of the President-elect Donald Trump unfolded. Few details on topics the market cared like infrastructure spending or fiscal stimulus were shared while the most combative aspects of his campaign were in full view.
The dollar limped toward it worst week in two months on Friday as softer-than-expected trade data from China added to signs that investors may be falling out of love with the post-U.S. election Trump trade.
So, Donald Trump finally spoke and down went stocks and the dollar. Shares of biotech stocks took a hit after the President-elect signalled that his U.S. government would negotiate aggressively on the price it pays for drugs. The U.S. dollar/Japanese yen currency pair, which tends to correlate positively with stocks, slumped.
Stock markets were pressured during late trading on Monday after the heavy depreciation in oil prices soured investor risk appetite. Asian shares closed mixed on Tuesday as the terrible mixture of depressed oil, renewed China concerns and Trump jitters prompted traders to adopt a cautious stance.
This morning, the pound initially fell further against the dollar and euro, but it has since bounced back to trade almost flat against both. It is far too early to call it a recovery, but the potential is there nonetheless. For more on the fundamental outlook on the pound please see our report from yesterday here.