Citi Bank shared its views on what it thinks are now the key USD post-election drivers. While Trump is now behind the wheel, markets expect the changes. What drives the greenback in these uncertain times?
Three USD post-election drivers
New York-based Citi Bank has shared its views what they think drives the USD the most in the post-election period. Straight after the election, USD have plunged the most out of all currencies. Currently, market experts believe that USD was most likely to be headed higher, as the US elections last week have concluded with Donald Trump getting a place in the White House. Analysts believe that the US inflation is also set higher, backing the USD.
Citi Bank analysts believe that USD is supported by the anticipations of:
-Corporate tax reform
-A faster pace of Fed hikes
The bank states that as long as these are the USD drivers, there is no reason for the greenback to be weakened.
Moreover, analysts at Citi Bank state that currently, investors are taking a very slight view of Mr. Trump’s likely influence on the equity markets. This is due to the fact, that they are expecting the promised infrastructure spending and tax reform by the winner of the US Presidential race. While Trump, Republicans and even some Congressional Democrats – all back the corporate tax reform, markets see the stimulus, therefore driving the USD up.
This, in turn, is pushing the US equities, real and nominal yields, and inflation expectations up. In case you hold US equities and USD, the picture looks good. The anticipated pace of the interest rates raise by the Federal Reserve (Fed) is now on the highest since March, implying that investors are seeing more aggressive Fed. Yet, it does not appear aggressive enough to ruin asset market profits.
Citi Bank states that it has added a short EURUSD from 1.09 and a long USDJPY from 106.75 to its portfolio last week.
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