On the night of Nov. 9, the S&P 500 E-mini futures were halted after dropping 5% on the news that Trump had won the election. Gold was up 4.3% and the Nikkei was down 5.3%. Markets are more comfortable with the status quo and Hillary Clinton representative it in this election. The panic subsided and SPY actually closed up 0.54 from the previous day’s close.
The fact that Sterling sharply depreciated across the board on Tuesday, after British inflation rates unexpectedly dropped to 2.6% in June, continues to highlight how the currency has become increasingly sensitive to monetary policy speculation.
It has certainly been an eventful week for the financial markets, as comments from central bank heavyweights which fueled monetary policy speculations and political uncertainty in Washington, breathed life back into the currency and equity markets.
Gold has been undermined by rising government bond yields owing to major central banks generally turning more hawkish while the still-buoyant equity markets means there has been reduced demand for the perceived safe haven asset. Thus, for the time being, the impact of the weaker U.S. dollar is not having any meaningful impact on the buck-denominated precious metal.
After an eventful day in the markets yesterday, U.S. stocks are higher, but off their best levels; gold is also up while crude oil has given up its earlier gains. In FX, the U.S. dollar is mostly weaker but not as much as the euro, while the British pound is up slightly and the Canadian dollar is significantly higher.
It appears that equity markets have taken inspiration from the performance of the financial market at the conclusion of last week, with Asian stocks trading broadly higher and European shares looking positive at the time of writing.