As the forex market with Donald Trump would look, is the big question in these last months, after declaring itself victorious of the American elections.
st half of the year, attention is now directed towards elections in future US The key question that drives the significance of this event is the potential Republican renegades choice, and the famous company, Donald Trump.
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Trump has caused controversy during his campaign with their points of extreme and controversial view that the idea of building a “wall” around America to prevent Mexicans from entering the country illegally, as he believes they are “major criminal part”.
But besides memorable soundbites and entertaining television appearances, the subject of his possible choice is also very important for the markets. As expected leader of the American administration Trump to make major changes in US policy which could have a significant impact on the US dollar, especially through the proposed Trump suggested protectionist agenda that would isolate the United States of its trading partners.
As Trump seen as an outsider who has taken a very extreme views and is seen as an unpredictable candidate, potential markets experience their choice of great uncertainty. If Trump managed to be elected to the US presidency, is expected to market uncertainty intensified, resulting in an acute period of “risk off” trade. During this time, traders can expect higher-yielding currencies like the Australian dollar, Canadian dollar and the dollar weakened as investors repatriate capital and move to traditional currencies like the Japanese yen. If Trump is selected and markets show a risk-off tone currency pairs like AUD / JPY, NZD / JPY, etc, it is likely to weaken.
Typically countries perceived as having an unstable political climate suffers outflow of investors. But when the United States is the world’s largest economy and the US dollar is the global reserve currency, it is difficult to accurately determine the usefulness of these outflows, although it is likely that the USD is lower in the short term at least.
While Trump has promised to offer an easier fiscal policy with large tax cuts and a significant increase in the cost of infrastructure, their disruptive on immigration and trade policies threaten growth prospects, which may affect the USD.
Base case scenario
A Clinton victory to the Republicans retain their majority in the House is the most likely outcome. This would constitute a very small deviation of the current political climate, and makes it difficult for Clinton to promote policies. But if Clinton wins and the Democrats also achieve a majority in the house, so this will make it much easier for her to push policies.
Clinton has declared its intention to raise corporate taxes on the rich, while expanding health care program Obama and infrastructure investment – it would likely lead to a boost in growth and would be positive USD.
A Clinton victory would keep the Fed on track to raise rates in December amid a recession in strength strengthening political risk. At the same time, the elimination of risk and uncertainty avoid a triumph of Trump also food JPY weakness as risk appetite improved, which USDJPY higher.
A win earns Republicans retain their majority in the House would give Trump the almost free rein to push through policy. As part of the policy Trump, increased fiscal spending, along with cuts in income and corporate tax, can improve short-term growth, the significant increase in import tariffs promised by Trump work against the US dollar by increasing the price of imports and Faster inflation, leading a decrease in the average growth over the long term.
A victory Trump is a bit harder to read for USDJPY as protectionist policies proposed by Trump could lead to a slowdown in Asia and weaker commodity markets.
In particular, it seems reasonable to expect that the dollar will rise against emerging and resource-rich economies. environment of risk-off is expected, however, created a win win probably would negate the effect that US interest rates will consolidate higher USD and YEN probably consolidate due to safe haven inflows.
Win win for weighing weight
The Mexican peso, particularly seem to fall against the US dollar in the event of a Trump triumph, because the restrictions proposed trade and immigration, to be located in Mexico that currently, about 75 to 80% of all Mexican exports go to USA. The risk is that Trump can get the US out of NAFTA he called “the worst trade agreement in history.”
The effect of a victory in the weight Trump is evident in the way the currency has responded during the campaign Trump. Emphasis was immediately weaker response to comments from Trump against Mexico earlier this year. But as Trump began to fall again in the polls during the summer, the peso recovered. While betting markets are now pricing in a lower win win probabilities; Traders are cautious after the recent vote Brexit that took place against the odds. As such, short weight is likely to collect more demand as a cover for a possible choice of Trump.