Articles tagged by Trump
Today marks the conclusion of an acrimonious US Presidential race, with two candidates promising very different approaches to handling the US economy. As a result, analysts have been furiously mapping out the potential impacts of either result.
If Clinton wins:
Analysts at ING predict that in the case of a Clinton win USD will retrace its pre-election losses and re-couple with Federal Reserve expectations.
“Latest breakout of wage growth from post-crisis range means a Clinton win should see markets (fully) price in a Dec Fed rate hike,” they note.
“Following the US election, global markets have reacted in predictable panic. Equity markets [and] the dollar sold off and gold rallied,” notes Kerim Derhalli, CEO of invstr.
Profit & Loss previously reported on the immediate aftermath of the surprise US election victory for Donald Trump, but the question facing markets now is: what next?
“Key will be now whether or not Trump will prove to be a populist or a pragmatic president,” says Valentijn Nieuwenhuijzen, chief strategist and head of multi-asset at NN Investment Partners.
As FX markets continue to anticipate what will happen next following Donald Trump’s surprise victory in the US Presidential election, there could also be significant changes in the country’s regulatory landscape that financial services firms need to consider.
For starters, the Commodity Futures Trading Commission (CFTC) could look very different.
Historically, when there’s a transition of parties, the Chairman of the Commission has tendered their resignation on the inauguration day of the new President and then the remaining Commissioners vote amongst themselves for an acting chairman.
With the immediate market risk of the US elections having diminished, Saxo Bank has returned its margin requirements to normal levels, with the exception of GBP pairs.
Saxo raised margin requirements ahead of the US election to try and ensure that its clients were appropriately leveraged going into what it expected could be a significant market event.
It raised the requirements on most major FX pairs up to 2%-3%, with MXN and RUB going to 15% and 10%, respectively. Claus Nielsen, head of markets at Saxo, comments:
Donald Trump’s position on the currency manipulation provisions in US trade deals could lead him into direct conflict with US Treasury once he assumes the presidency, according Dick Cunningham, a senior international trade partner at Steptoe & Johnson’s Washington office.
Speaking on a webinar examining some of the implications of this week’s US presidential election, Cunningham noted that Trump has vowed to kill the proposed Transatlantic Trade and Investment Partnership (TTIP).
One reason why Trump has criticised the TTIP in the past, said Cunningham, was because although it contains a currency manipulation provision, the provision is not enforceable.
Comments made Sunday by US president-elect Donald Trump on Twitter have sparked fresh speculation as to whether his administration will label China a currency manipulator once he is in office.
China lodged a formal complaint to the US government after it emerged that Trump held a phone call with the President of Taiwan on Friday, in breach of decades of diplomatic protocol.
“I can tell you that the Chinese side has lodged solemn representations with the relevant party on the US side both in Beijing and Washington. China has got its message across to the world as a whole with regard to Taiwan-related issues. The US side, president-elect Trump's team included, is also fully aware of China's solemn attitude on the issue,” said the Chinese Foreign Ministry spokesperson, Lu Kang, in a press conference today.
FX market participants face numerous challenges next year in adhering to regulatory deadlines, according to experts on a recent Profit & Loss webinar.
One of the more immediate regulatory deadlines that firms are currently preparing for is on March 1, 2017, when the new variation margin requirements for non-cleared derivatives come into force.
But as Gabriel Rosenberg, a partner at Davis Polk pointed out, there are a number of factors within these requirements that are making them difficult for firms to comply with, even in instances where they are already exchanging variation margin with their counterparties.
Timothy Massad has tendered his resignation as Chairman of the US Commodity Trading Commission (CFTC) to President Barack Obama, effective on January 20, 2017.
“For the past two-and-a-half years, I’ve had the privilege of working alongside the very talented CFTC staff, and I thank them for their dedication on behalf of the American people. I also want to express my appreciation to my fellow Commissioners, Sharon Bowen and Chris Giancarlo, for the constructive and collaborative engagement we have had throughout my tenure. I am also very grateful to President Obama for giving me the opportunity to lead this important agency,” said Massad in a statement issued today.
The Mexican peso dropped to a new low against the US dollar on Wednesday, in anticipation of the policies likely to be pursued under a Trump administration in the US.
MXN fell more than 2% against the USD, hitting 21.619, breaking the previous record low of 21.3952 that was set three days after Trump’s election victory on November 8.
As part of Trump’s election campaign, he has called for an overhaul of the North American Free Trade Agreement (NAFTA) and subsequently USD/MXN was often watched as a proxy on the election result during the presidential campaign and could be seen to fluctuate around the highly publicised presidential debates.
Last year the FX market was highly event driven, with periods of sustained low volatility occasionally punctuated by large but episodic market moves.
Looking ahead to 2017 and there are already clearly some events set to take place that have the potential to drive further bursts of volatility, namely the invocation of Article 50 by Britain to begin its exit from the European Union and the scheduled political elections in France, Holland and Germany.
In addition, the change of policy direction expected under US Presidential-elect, Donald Trump, and the US Federal Reserve’s indication at the end of 2016 that it currently plans to raise rates three times this year are expected to be major drivers of the currency markets in the coming year.
What impact will the election of Donald Trump have on the regulatory landscape for foreign exchange? Galen Stops reports
In recent years, regulation has been a key theme for the FX industry, despite the fact that this market has been directly addressed by very little regulation since the financial crisis.
But in 2017 there will be one figure that will loom large in any discussion involving the regulation of the financial services industry, with that of course being the US president-elect, Donald Trump.
In the interests of total transparency we also, as usual, cast our eye over last year’s predictions to see how they went. As always, these predictions will be viewed through rose-coloured spectacles to ensure we look as good as possible!
We kicked off last year’s predictions by suggesting the entire FX world would take a more realistic view of developments – that liquidity and spreads would reflect this thought process, and that market share would be a declining influence in business decisions.
Sharon Bowen, commissioner at the US Commodity Futures Trading Commission (CFTC), warned that it could prove “reckless” to repeal Dodd-Frank, despite calls from Donald Trump to do so while he was campaigning for the presidency.
Speaking at the 2017 Brodsky Family Northwestern JD-MBA Lecture Series, Bowen acknowledged that the regulatory agenda under a Trump presidency is likely to be very different compared to when she joined the commission almost three years ago.
“When I first became a commissioner, it was with the expectation that the CFTC would continue its mission, established by long-standing laws and reaffirmed under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
Uncertainty regarding both financial conditions within Mexico and geopolitical developments internationally is making it hard to predict how the peso will fare in 2017.
Speaking at Profit & Loss Latin America, which took place on February 9 in Mexico City, economic experts warned that there are numerous variables that could impact the value of the Mexican currency this year, making accurate forecasts challenging.
“Uncertainty will be the name of the game this year,” explained Daniela Blancas, a financial market economist at CitiBanamex.
When assessing which large tail risk events are likely to take place in 2017, speakers at Profit & Loss’ Forex Network London emphasised that there are other risk factors being overlooked that might have a greater impact on financial markets.
“Like last year, the tail risks this year are quite high compared to normal,” said Colin Harte, strategist and senior portfolio manger at BNP Paribas Investment Partners. “There are some quite material risks that – if they come to pass – could have a significant impact on markets.”
He noted, however, that many of the expected tail risk events from 2016 were less dramatic than expected in the end: sterling took an obvious hit after the Brexit result, but soon became range-bound again, while the Trump election victory actually led to a rally in the equity markets.
Galen Stops looks at the drivers behind the appreciation of the Mexican peso and asks whether the rally can continue.
Few, if any, saw this coming.
After Donald Trump won the US presidential race in November 2016, USD/MXN went from 18.03 up to 20.89, and by the time of his inauguration in January 2017, the exchange rate was up to 21.58.
This depreciation of the peso seemed eminently reasonable at the time, given that on the campaign trail Trump had promised to renegotiate the North American Free Trade Agreement (Nafta) in America’s favour or terminate the agreement altogether, not to mention building a border wall between the US and Mexico at the latter’s expense.