Dollar steady

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TOKYO- The dollar hung just off a four-month high on Thursday as the market continued to digest Republican Donald Trump’s win in the US presidential election, while investors eyed several central bank decisions that will be topped off by the Federal Reserve.

The Fed is expected to cut interest rates by 25 basis points later in the day, and the market focus will be on any clues suggesting the US central bank could skip a cut in December.

Last week’s October jobs report came in weaker than expected, raising questions over the degree of softness in the labor market, though this data was clouded by the impact of recent hurricanes and labor strikes.

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The Fed’s decision comes on the back of the US presidential election, with a victory by Trump fueling questions over whether the bank may proceed to reduce rates at a slower and shallower pace.

While the former president’s comeback to the White House received a “market-pumping” reaction, there were “mixed feelings when you dig a little deeper into the moves,” said senior market analyst Matt Simpson at City Index.

US equities at record highs and a weaker yen appeared to be an “endorsement for Trump,” but a stronger dollar and higher US Treasury yields indicated markets were pricing in a less dovish Fed going forward, he said.

Trump’s policies on restricting illegal immigration, enacting new tariffs, lowering taxes and deregulation may boost growth and inflation and crimp the Fed’s ability to cut rates.

A full sweep by Republicans would allow the party to make larger legislative changes and in turn likely provoke larger currency moves, although control of the House of Representatives remains in question.

Markets now see about a 70 percent chance the Fed will also cut rates next month, down from 77 percent on Tuesday, according to the CME Group’s Fed Watch Tool.

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