2016-11-11 12:38:07

Unexpected victory of Donald Trump at the presidential election on Wednesday has increased uncertainty about the future of the U.S. economy, which caused sharp decline in the USD.
However, at the beginning of the European session the USD has regained the losses and continued to rise yesterday.

The rise in the USD is caused by expectations that the increase in the budget expenditure, which is planned by Donald Trump, will force the Fed to raise interest rates.
Fiscal stimulation, which is planned by Donald Trump, will support the US economy.

It is worth noting that after the election of Donald Trump, the agency S&P has confirmed US credit rating at AA+ and said the rating outlook remains stable.

However, if Trump decides to raise import duties and toughen the terms of trading agreements, the Fed may not raise rates. Governor of Richmond Fed Jeffrey Lacker said on Thursday that monetary policy tightening in the USA is well-justified and this will not change despite the events of the week.

The head of St. Louis Fed James Bullard also said yesterday that the Fed plans to raise rate by 0.25% at the meeting in December. The rate hike will support the USD, making it more attractive for investors who are focus on stable returns. According to CME Group, on Thursday, the futures market estimated probability of the rate hike in December at 76.3% against 71.5% on Wednesday.

Now, Europe needs to apply more efforts to solve the problems, said German Finance Minister Wolfgang Schaeuble on Thursday. He said that the current soft monetary policy and excess of liquidity can trigger risky investments. Existing policy enables to postpone necessary economic reforms.