FX Daily Market Report 10 November 2016

Good morning, in today’s report:
·         Risk off sentiment fades as investors evaluate what a Trump presidency will look like
·         PBoC set the CNY fixing at its lowest level in six years
·         RBNZ cut the Official Cash Rate (OCR) by 25bp to 1.75% overnight
Market News
·         The US election resulted in a Republican sweep of the White House and Congress. The immediate shift towards safe haven assets began to unwind throughout the course of the day yesterday, with USDJPY climbing back above pre-election levels
o    Focus now turns to whether Trump will be able to fully enact his policy agenda including lighter regulation and infrastructure spending programmes. US 10 year treasury yields jumped c.35 basis points yesterday on expectations of Trump administration spending likely spurring stronger growth and inflation
·         In FX, there was a high level of volatility yesterday in EURUSD, which traded a 6% round trip. EUR ended the day lower against USD due to subsequent USD strength combined with a perceived heightened risk of European political uncertainty
o    EURGBP underperformance was a key talking point yesterday, with the pair breaking recent range lows at 0.8850 on the way to 0.87635
·         Elsewhere, the PBoC set the CNY fixing at its lowest in six years. USDCNH remains above the psychologically important 6.80 level with attention turning to upcoming China data
·         Overnight, the RBNZ cut the Official Cash Rate (OCR) by 25bp to 1.75%, in line with our forecast and market expectations
·         The G10 calendar is limited today, with markets likely to continue to digest the potential impact of Donald Trump’s victory
What to Watch for Today
·         A fairly quiet day for the calendar, we have industrial production data from Italy (Barclays Research Forecast: -1.5% m/m, Consensus: -1.0% m/m) at 9.00. This afternoon we have US St. Louis Fed President Bullart (FOMC voter) speaking on US economic outlook in St. Louis followed by ECB Vice President Constancio speaking in Stockholm at 14.50
Regards All.

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