Trump 2.0 prompts USD surge
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Daily Currency Update
The New Zealand dollar tracked lower through trade on Wednesday as markets responded to the US election and likely Trump victory. US equities, treasury yields and the US dollar all rallied as early counting suggested key battleground states were, while hotly contested, leaning toward Trump. With the former President gaining ground in key counties, a pall was cast over Democrat hopes and markets began extending support for the USD. After Trump won crucial states like Wisconsin, Michigan, Georgia and Pennsylvania, the race was all but over. With control of the Senate returning to the Republicans, Americans have given Trump a clear mandate to enact his polices. Having opened the day trading near US$0.6015 the NZD fell steadily giving up more than 1% before finding support. Having touched intraday lows at US$0.5915, the NZD then recovered to close back near US$0.5950. What does this mean for the NZD through the near term? Trump’s victory likely means a weaker Chinese economy as new and more punishing tariffs are introduced, while question marks surrounding the broader global trade landscape will weigh on risk sentiment. It is likely the NZD will face near term headwinds, and we look to China policymakers for a response to this election result. We expect the NZD will be weaker for longer, while supports near US$0.5880 remain intact.Our attentions now turn to China Trade Data and US jobless claims and productivity numbers ahead of tomorrow’s all important Federal Reserve policy meeting.
Key Movers
With all eyes on the US election and the likely victory for Trump, markets pushed the Trump trade narrative, extending gains across US equities, yields and the US dollar. Having won the Electoral College vote comfortable and with republicans regaining the Senate, while the house remains too close to call, Americans have given Trump a clear mandate to enact key policies. We expect Trump will move quickly when he steps back into the White House, issuing tighter border controls and punishing tariffs. The US DXY index jumped 1.6% for the day as all 10 Major currencies gave up ground. The euro slipped back below US$1.0740 while the yen was another clear underperformer, allowing the USD to push back above 154.50. As the dust settles on this historic election result, our focus turns now to China Trade data, The Bank of England (BoE) policy meeting and the FOMC rate decision. We expect both the Fed and BoE to cut rates by 25 basis points.Expected Ranges
- NZD/USD: 0.5900 - 0.6020 ▼
- NZD/EUR: 0.5480 - 0.5580 ▲
- GBP/NZD: 2.1500 - 2.1800 ▼
- NZD/AUD: 0.9020 - 0.9080 ▲
- NZD/CAD: 0.8250 - 0.8350 ▼