The US Dollar’s momentum continues upwards on the news that Donald Trump, has officially been named the new US President and will assume office in early 2017. Stock markets have rallied with DOW edging closer to the 20k marker.
Markets remain confident that Trump, who faced heavy criticism during and after his campaign for Presidency, will stimulate the US economy and improve business conditions.
Pound to US Dollar exchange rates remain close to their post-Brexit lows, whilst Euro to US Dollar rates have hit record lows not witnessed in over a decade.
The bullish stance on the US Dollar is not only driven by the President-elects confirmation, the prospect of 3 US interest rate hikes in 2017 is driving demand for the Dollar. Furthermore, political uncertainty elsewhere has also bolstered the USD’s position.
US Dollar strength to continue in 2017?
With Brexit and the European elections next year, the US Dollar’s safe haven status has once again sprung to the forefront of investor decisions, the added potential for 3 hikes has also drawn investment from commodity currencies such as the Australian Dollar, back into the safe hands of the US Dollar.
Markets are yet to determine whether Trump’s plans will materialise, and whilst its true that further US rate hikes could strengthen the Dollar’s position, economic uncertainty elsewhere could provoke a negative reaction from the FED.
It was witnessed throughout 2016 when the FED made a promise of 4 hikes, when in reality only one made it through the net. This was due in part to concerns within the Chinese economy, as well as the Brexit vote in June. This level of unpredictability could continue in 2017 and there’s every chance the FED may hold off during periods of Global uncertainty.
That being said, the bullish approach to the US Dollar may continue this side of Christmas, with EUR/USD exchange rates edging towards parity.