The Euro Gains Against the Dollar on Trump and Weak Indicators
The euro continued its rise against the dollar on Wednesday, November 2. Forex traders were nervous as the race for the White House nears its end, with the win all but handed to Hillary Clinton. By most accounts, the Democratic candidate soundly beat Donald Trump in the third and final debate on October 19. However, two polls this week suggest that the race is far from over. Trump has made strong gains.
One survey showed that Trump has gained a point or two over his rival. (Source: “Global markets in ‘early stages of panic’ after poll gives Donald Trump lead,” The Independent, November 1, 2016.) Such a prospect falls short of pleasing the markets. Currency traders tend to read bearish signs in the face of political uncertainty. In this case, the EUR/USD is moving in favor of the euro amid growing volatility—at least in the short term.
While being the most significant contributor to the uncertainty, Trump’s rise in the polls is not the only factor making currency traders nervous. (Source: “Trumpxit: Rise in EUR/USD Implied Volatility Betrays Market Nerves at Trump Victory,” Pound Sterling Live, October 30, 2016.)
The uncertainty also concerns the decision of the Federal Reserve’s monetary policy committee on interest rates. As of November 2, the Fed confirmed the status quo on interest rates. Traders got little to help them refine the odds of a rate hike by the end of the year. That should raise the dollar against the euro. However, there are a lot of things riding on the outcome of the election, which is less than a week away.
And there’s one more report that’s making traders lose sleep. On November 4, the United States Department of Labor will release an official report on U.S. employment numbers. Traders got a sample this afternoon with the publication of ADP ’s own survey on employment. Analysts consider ADP’s employment numbers a reliable predictor. The picture is not good. ADP said the private sector added 147,000 jobs in October. That falls short of the 165,000 additions economists had expected. (Source: “Will holiday hiring save U.S.from another weak month for job growth?,” USA Today, November 2, 2016.)
Trump’s rise in the polls and a weak jobs report are putting pressure on the dollar and the markets. Meanwhile, continued strength in the German economy—as suggested by solid employment numbers there—have propped up the euro.