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US Mid-Term Elections Lead to Weaker US Dollar and Higher Risk-Sentiment

Pound News: Sterling Limp as Markets Focus on US Politics

A lack of notable UK news or Brexit developments on Wednesday left the Pound reacting largely to movements in rival currencies.

Lasting hopes that the UK and EU could be closing in on a sweeping soft Brexit deal prevented the British currency from losing ground against rivals like the Euro, but too many Brexit uncertainties remained for Sterling to hold against losses from safe-haven currencies.

No notable UK data will be published today, so Pound investors will be anticipating Friday’s UK growth stats, as well as any potential Brexit developments.

 

Euro News: Mixed Eurozone Data Keeps Pressure on Euro

Some stronger than expected Eurozone retail sales and German industrial production data helped the Euro to climb against some of its weaker rivals on Wednesday.

However, Eurozone retail sales still disappointed month-on-month, and Germany’s construction PMI came in with a contraction in October. The data overall continued to indicate that the Eurozone’s economic activity was slowing considerably towards the end of 2018.

US trade protectionism remains a concern for Euro investors, so if Germany’s September trade balance report impresses investors today it could provide the Euro some support.

 

US Dollar News: US Dollar Sold off as US Congress Returns to Gridlock

As was generally forecast by polls, the US 2018 Mid-Term Elections ended with the Democratic Party taking majority control of the House of Congress, while the Republican Party tightened its grip on the Senate.

The news meant that US Congress is now gridlocked, and legislation will have trouble getting through as the parties will continue to clash. US President Donald Trump may struggle to push through new fiscal policy into law, so the US Dollar has weakened.

The outcome was generally unsurprising so it’s unlikely to influence the US Dollar for too long. Today, US Dollar investors will be focused on the upcoming Federal Reserve policy decision, and the US Dollar could strengthen if the bank indicates its policy outlook is more hawkish than expected.

 

Canadian Dollar News: Canadian Dollar Weighed Down by US Dollar Weakness

While the Canadian Dollar was able to advance against the US Dollar due to higher risk-sentiment and the results of the US Mid-Term Elections, the US Dollar’s broad weakness also had a negative effect on Canadian Dollar strength.

Weaker prices of oil, Canada’s most lucrative commodity, put further pressure on CAD. Canadian Dollar weakness came despite continued strong Canadian data, including October’s Ivey PMI which beat expectations on Wednesday and surged to 61.8.

 

Canadian housing starts from October and new housing prices from September will be published today, but the Canadian Dollar’s strength will also be influenced by oil prices and other factors influencing risk-sentiment.

Australian Dollar News: AUD Enjoys Risk-Sentiment Boost

Despite some disappointing Australian construction data, the Australian Dollar climbed versus the Pound on Wednesday as the risky trade-correlated currency was bolstered by market reaction to the US Mid-Term Elections.

A weaker US Dollar made the Australian Dollar more appealing. Speculation that the US would struggle to push through new market-influencing fiscal policy also made investors more willing to take risks.

No notable Australian data will be published today, leaving investors to react to shifts in risk-sentiment. Australian Dollar investors will also be anticipating tomorrow’s Australian home loans data and latest Reserve Bank of Australia (RBA) statement.

 

Upcoming Data

Thursday, 8th November

07:00    German Trade Balance

07:45    French Trade Balance

09:00    Eurozone Central Bank Economic Bulletin

13:15    Canadian Housing Starts

13:30    Canadian New Housing Price Index

19:00    Federal Reserve Policy Decision

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To keep up to date with the Euro, visit the Euro Blog in our Currency News section.

 

Adam Wiffen

Currency Trader

aww@fcgworld.co.uk

 

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