USD seen gathering further traction post-Trump – Danske Bank

Analyst at Danske Bank Mathias Mogensen has given his views on the greenback following Trump’s win on Wednesday.

Key Quotes

“The knee-jerk reaction in the FX markets with a Trump win was largely as expected – at least in respect of the direction”.

“However, the negative sentiment and the sell-off in the USD very quickly reversed and EUR/USD is trading below 1.0950 and USD/JPY above 105 this morning”.

“Indeed, given the large amount of uncertainty given that we really do not know Trump’s plans implies that price action could be more volatile in the near term and sensitive to news about which policy Trump actually intends to lead”.

“However, one of the most interesting observations from yesterday is that US 5Y5Y break-even inflation rose substantially along with a rise in yields in the long end of the US curve, suggesting that markets have priced in higher inflation”.

“In our view, this supports the case for a December rate hike from the Fed – which we still expect. Hence, EUR/USD is likely to grind lower and USD/JPY higher ahead of the FOMC meeting”.