Speed of US Dollar’s Losses Accelerate as Forex Markets Respond to Election

James Randall

ElectionThe impact of the outcome of the US congressional elections showed no sign of cooling off on Wednesday as the dollar dropped significantly in value.

The results saw the lower chamber of Congress, the House of Representatives, go to the Democrats – while the upper chamber, the Senate, went to the Republicans.

With Congress now officially divided and the prospect of instability and even gridlock looming, US dollar investors responded by moving away from the currency.

The dollar index, a gauge of the currency’s value in comparison to other major international currencies including the euro and the British pound, dropped half a percentage point on Wednesday. It now sits at a two-week low point of 95.758.

Other global currencies performed well over the course of Wednesday.

The euro rose to $1.1491 in the EUR/USD pair, which represented a 0.6% rise. The British pound sterling also rose, this time by 0.5%, following renewed optimism over the prospect of a Brexit deal.

According to BBC News, members of Prime Minister Theresa May’s Cabinet have now been shown the text of the draft deal. She has described the deal as being 95% completed.

With the week beginning to draw to a close, there are still a few events on the horizon for global forex traders to keep an eye on.

This morning will see the regular jobs data releases out of the US, which are due out at 1.30pm GMT. Initial jobless claims are expected to stay constant at 214,000, but continuing jobless claims are predicted by analysts to rise from 1,631,000 to 1,635,000.

An important speech from the European Central Bank’s President, Mario Draghi, is expected at 3.20pm GMT.

Swiss franc traders, meanwhile, should watch out for a speech from Andréa Maechleris, the Swiss National Bank’s Governing Board Member, at 5.30pm GMT.

Into Friday, an event for euro traders to monitor is the release of industrial output information for September from France. This is due at 7.45am GMT.

Later in the day, British industrial and manufacturing production figures for September will be out at 9.30am GMT. It is expected that manufacturing figures will see a year on year dip from 1.3% to 0.4%, while the industrial equivalents will go from 1.3% to 0.5%.

In the same release, Britain’s gross domestic product data for September will be made public. Month on month change here is expected to show a slight rise from 0% to 0.1%.

Two major central bankers from around the world will speak later on Friday. Benoît Cœuré, who sits on the European Central Bank’s Executive Board, will speak at 10am GMT. While Randal Quarles, Vice Chair for Supervision of the Federal Reserve Board of Governors in the US, will speak at 1.15pm GMT.

The week will be rounded off with the US producer price index for October, which will be released by the Department of Labor at 1.30pm GMT. The year on year change here is expected to be nil, and levels are forecasted to remain at 2.6%.

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James Randall
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