Donald Trump is the new President – What does it mean for the Market?

Finally…Donald Trump is the new President of the United States of America. 

“Wall Street pared gains sharply on Friday after Donald Trump made his inaugural speech as the 45th president of the United States.” From this day forward it is going to be only America first,” Trump said after being sworn in, adding that the U.S. policy will be to buy American and hire America” (Reuters)

The markets will be weary of protectionism and trade wars which are going to come:

“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” Trump said. “Protection will lead to great prosperity and strength. I will fight for you with every breath in my body and I will never ever let you down.”

The reaction in the currency markets so far however has been muted…

A strengthening dollar and a “race to the bottom” on taxes, deregulation and trade policy are the major risks to the global economy, financial leaders said on the final day of the World Economic Forum in Davos. Asked about events, that could hit the global economy in 2017, International Monetary Fund (IMF) chief Christine Lagarde noted risks from U.S. president Donald Trump:

“If the disruptions we are expecting for 2017 as a result of what has happened in 2016 prove to be all negative and we are to end up in a race to the bottom on the tax front, on the trade front, on the financial regulation front, then that for me would be a really big ‘black swan’ that would have devastating effects,”

The dollar looks set to go higher long term on most major currencies except the JPY which is the major safe haven currency so we expect more strength. In terms of GBP/USD we still expect more strength due to its oversold condition:

The GBP registered its strongest gain against the dollar since the start of December. After the weakest UK retail sales figures in almost five years the GBP has settled near the high of the day. We still expect more strength in the GBP as it still remains oversold on the USD and most major currencies after falling to far on fear of a hard Brexit. We expect a firm open next week to follow through to the upside.

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