Trump trade drives pound down to four-month low against the dollar
Donald Trumpâs election victory last week is continuing to shift the markets.
The pound has dropped to its lowest level against the US dollar since early July this morning, down half a cent to $1.2653.
On election day, sterling was worth $1.30, but it has been sliding since as traders have anticipated that Trumpâs tax cuts and tariffs will be inflationary, meaning US interest rates stay higher.
The euro has dropped to a one-year low, at â¬1.0524 against the US dollar.
These latest losses came as the Republicans secured a majority in the US House of Representatives, which could give Donald Trump sweeping power to enact his legislative agenda.
Kathleen Brooks, research director at XTB, fears the pound could head lowerâ¦.
President Trumpâs clean sweep at last weekâs election has been confirmed with the Republicans winning the House. This was expected; however, it gave the dollar a boost overnight, and GBP/USD sunk below $1.27.
If we donât see a stabilization in the pound, then it opens the door to a further decline to $1.25. There were some concerns that winning the trifecta of elections could give President elect Trump concentrated power, however, his choice of John Thune for Senate majority leader is interesting â he has clashed with Trump before and was not Elon Muskâs choice for the role.
This suggests two things: firstly, that the Trump administration could surprise us. Secondly, that although Republicans now control the main organs of power in the US, the President elect may not get his way on all matters. The question is whether this appointment will halt the Trump trade, stocks are pointing to a lower open in the US, although the dollar remains upbeat.
Stephen Innes, managing partner at SPI Asset Management, predicts a âfull-blown dollar tsunamiâ once Trump is back in the White House:
Investors are caught in a whirlwind of global uncertainty and trade anxieties. With Trumpâs anticipated tariffs looming like storm clouds, those markets in the line of tariff fire are bracing for impact.
I hope youâre not underestimating whatâs brewing because Trumpâs trade and domestic agenda is setting up a US dollar moonshot like weâve never seen. This weekâs price action? Just a tremor before the full-blown dollar tsunami thatâs bound to hit with Trumpâs second term.
Key events
Inside Out 2 and Deadpool & Wolverine drive earnings at Disney
The sucess of this summerâs films âInside Out 2â and âDeadpool & Wolverineâ have helped Walt Disney to report forecast-besting results today.
Disney has grown its adjusted per-share earnings to $1.14 for the July-September quarter, up from $0.82 a year earlier, and ahead of forecasts of $1.10 per share.
Revenues increased by 6% in the quarter, although pre-tax income dipped by 6%.
Disneyâs Content Sales/Licensing and Other revenues rose by 39% in the quarter.
Disney says:
Pixarâs Inside Out 2 and Marvelâs Deadpool & Wolverine broke numerous box office records and helped drive $316 million in operating income at Content Sales/Licensing and Other in Q4.
It also increased its Disney+ Core paid subscriber base by 4.4 million during the quarter, to more than 120 million.
Disney has also forecast it will achieve âhigh-single digitâ growth in adjusted earnings per share (EPS) in the next financial year, rising to âsouble digit adjusted EPS growthâ in the 2026 and 2027 fiscal years.
CEO Bob Iger says:
âThis was a pivotal and successful year for The Walt Disney Company, and thanks to the significant progress weâve made, we have emerged from a period of considerable challenges and disruption well positioned for growth and optimistic about our future.â
The dollar is trading at its highest level against a basket of currencies in over a year.
The dollar index is up 0.4% today, to its highest since the start of November 2023, extending the rally which began after the US election.
Shares in gold producer Resolute Mining have been suspended at the companyâs request, amid a tax row that has seen the companyâs CEO detained in Mali.
Resolute told shareholders that a temporary halt on trading its shares on the Australian Stock Exchange has begun, and that the company will provide further updates âas and when appropriateâ.
Its chief executive, Terry Holohan, and two other Resolute employees were detained in Bamako, Maliâs capital, last Friday, after attending a meeting to discuss a demand to repay back taxes and a renegotiation of terms over its Syama gold mine.
Bloomberg reports that Mali are demandng Resolute pay about $160m to resolve the tax dispute.
Gold is on track for its fifth daily fall in a row.
The spot gold price is down 1% today, to $2,547 per ounce. At the end of last month, it hit a record of $2,790 per ounce, but has been dipping through November.
George Saravelos, of Deutsche Bank Research, says this fall has âconfounded expectationsâ, and cites three messages we can take from it:
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This market is NOT worried about US credit risk. If the market was becoming concerned about excessive fiscal deficits, fiscal dominance and a loss of central bank independence in the US gold would be the first thing that would be going up. This is of course also reflected in the very muted moves in US term premia and inflation break-evens so far. We see gold price action as confirming the argument we have been making throughout the year that the US is not at risk of a twin deficit currency crisis any time soon.
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Demand for gold reserves from central banks is going down. The reasoning here is simple: Trump policy is likely to put weakening pressure on many emerging market currencies most notably CNY. By extension, many central banks now need to spend dollar reserves to defend their FX from capital outflows and prevent excessive weakening. We have been showing that Asian central banks have been diversifying their holdings in to gold. They now have to spend more of these dollars defending their currencies instead.
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The USD remains the pre-eminent safe-haven currency of choice. Some have been arguing that the dollarâs appeal is in structural decline, with the weaponization of sanctions and trade a key driver. In contrast, our view has been the opposite: while public sector demand for dollar assets might be dropping, private sector demand has been rising and matters much more: the greater the risk a government gets sanctioned by the US, the bigger the net demand for dollars. Price action since the US election victory is therefore not only consistent with a rising risky asset demand for US assets (US over global equities) but safe-haven demand too (dollar up against all global FX and gold).
Ukrainian government bonds are rallying again this morning, on anticipation that Donald Trumpâs return to the White House could end its war with Russia.
Reuters has the details:
Longer-dated maturities saw the biggest gains, with 2035 paper rising 2.6 cents to be bid at 56.73 cents, its highest. since the bonds were launched in early September as part of the countryâs debt restructuring, Tradeweb data showed.
Trump has pledged a quick end to the Russia-Ukraine war once he takes office in January, but he has yet to share details on how he would achieve it.
UK mortgage rates rise
Bad news for those looking to buy a house in the UK: mortgage rates are moving up again.
Moneyfacts has reported that the average fixed-term mortgage rates have risen this morning, even though the Bank of England cut interest rates last week.
They report:
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The average 2-year fixed residential mortgage rate today is 5.48%. This is up from 5.44% the previous working day.
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The average 5-year fixed residential mortgage rate today is 5.21%. This is up from 5.17% the previous working day.
Several banks have raised their mortgage rates in recent days, such as Santander, TSB, HSBC, Virgin Money and Nationwide Building Society.
This follows a pick-up in the yields (rate of return) on UK short-term government bonds since the budget. They are used to price mortgage rates, and have risen as traders have anticipated higher borrowing.
Statistics body Eurostat has reported that the eurozone economy grew by 0.4% iin the third quarter of this year, matching its initial âflashâ estimate.
That means growth accelerated in July-September, up from 0.2% in April-June.
Irelandâs GDP grew by 2%, while Spain and the Netherlands both expanded by 0.8%. Franceâs GDP rose by 0.4%, while Germany lagged behind with 0.2% growth.
Eurostat also reports that employment in the eurozone rose by 0.2% in the last quarter.
Trump trade drives pound down to four-month low against the dollar
Donald Trumpâs election victory last week is continuing to shift the markets.
The pound has dropped to its lowest level against the US dollar since early July this morning, down half a cent to $1.2653.
On election day, sterling was worth $1.30, but it has been sliding since as traders have anticipated that Trumpâs tax cuts and tariffs will be inflationary, meaning US interest rates stay higher.
The euro has dropped to a one-year low, at â¬1.0524 against the US dollar.
These latest losses came as the Republicans secured a majority in the US House of Representatives, which could give Donald Trump sweeping power to enact his legislative agenda.
Kathleen Brooks, research director at XTB, fears the pound could head lowerâ¦.
President Trumpâs clean sweep at last weekâs election has been confirmed with the Republicans winning the House. This was expected; however, it gave the dollar a boost overnight, and GBP/USD sunk below $1.27.
If we donât see a stabilization in the pound, then it opens the door to a further decline to $1.25. There were some concerns that winning the trifecta of elections could give President elect Trump concentrated power, however, his choice of John Thune for Senate majority leader is interesting â he has clashed with Trump before and was not Elon Muskâs choice for the role.
This suggests two things: firstly, that the Trump administration could surprise us. Secondly, that although Republicans now control the main organs of power in the US, the President elect may not get his way on all matters. The question is whether this appointment will halt the Trump trade, stocks are pointing to a lower open in the US, although the dollar remains upbeat.
Stephen Innes, managing partner at SPI Asset Management, predicts a âfull-blown dollar tsunamiâ once Trump is back in the White House:
Investors are caught in a whirlwind of global uncertainty and trade anxieties. With Trumpâs anticipated tariffs looming like storm clouds, those markets in the line of tariff fire are bracing for impact.
I hope youâre not underestimating whatâs brewing because Trumpâs trade and domestic agenda is setting up a US dollar moonshot like weâve never seen. This weekâs price action? Just a tremor before the full-blown dollar tsunami thatâs bound to hit with Trumpâs second term.
IEA: Oil market to be in surplus in 2025
In other energy news, the International Energy Agency has predicted that the oil market will run a surplus next year.
In its latest monthly report, the IEA says that concerns over the health of the global economy have hit the oil price in recent weeks, with Chinese demand contracting for a sixth straight month in September.
It predicts that the oil market will be âwell-suppliedâ in 2025; the IEA estimates that oil consumption will rise by 990,000 barrels per day next year, while non-OPEC+ supply is expected to grow by 1.5 million barrels per day in 2025.
As a result, even if the Opec+ group continues to postpone its planned production increase, the IEA reckons supply will outpace demand.
It says:
Our current balances suggest that even if the OPEC+ cuts remain in place, global supply exceeds demand by more than 1 mb/d next year.
With supply risks omnipresent, a looser balance would provide some much-needed stability to a market upended by the Covid pandemic, Russiaâs full-scale invasion of Ukraine and, most recently, heightened unrest in the Middle East.
UK and European gas prices at one-year high
UK and European gas prices have risen to their highest levels in a year.
The European gas benchmark has risen by 4.5% this morning to â¬45.65 per megawatt hour, the highest since November 2023.
The price of next-day gas in the UK is also trading at its highest since last November, up 4% to 115p per therm.
The increase comes as colder weather in Europe drive up demand for heating. Low wind speeds have also caused a âdunkelflauteâ in the region, meaning less power could be generated by wind farms.
A drop in supplies from Russia is also a factor.
Bloomberg is reporting that Russiaâs Arctic LNG 2 project has slashed output at its gas fields to nearly zero so far this month, due to western sanctions.
Andâ¦.Germany has warned its state-operated gas import terminals to reject any Russian cargoes of liquefied natural gas, after it was notified of a planned shipment, the Financial Times reports this morning.
According to the FT, the German economy ministry has instructed Deutsche Energy Terminal ânot to accept any deliveries of Russian LNGâ.
A third possible factor is that Austrian oil and gas group OMV has been awarded â¬230m by the International Chamber of Commerce (ICC) over irregular German gas supplies from Russiaâs Gazprom.
OMV plans to offset the claim against its bills to Gazprom Export to obtain its compensation, but there are concerns that Gazprom could potentially stop supplies to Austria in response.
Austrian energy minister Leonore Gewessler wrote in a post on X yesterday:
The current developments surrounding the OMV supply contract for Russian gas are to be taken seriously, but do not pose an immediate threat to our security of supply. We have always known that gas supplies from Russia are unsafe.
âWe have been preparing for a possible supply disruption for a long time. In any case, our countryâs gas supply is secure. Our gas storage facilities are full.â