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Markets on Edge After Trump’s Historic Upset

Published November 9, 2016
  • Donald Trump delivered a resounding thumping of the Democratic party last night as the Republicans completed an election night trifecta 
  • The White House along with both branches of Congress, the Senate and the House, are now under Republican control following a stunning come-from-behind victory that has flipped Washington's establishment on their head and left them spinning by the road side – Capitol Hill belongs the Republicans and Donald J. Trump
  • Global markets have lurched lower in unison as the continuity of policy that Hilary Clinton represented has now given way to fear of the unknown
  • Dow futures dropped as much as 875 points before stabilizing and the USD, at one point, was 3% lower against the Japanese Yen as traders scrambled into safe havens
  • WTI fell as much as 4.5% before clawing back losses to trade unchanged on the day at $44.96
  • USDMXN rose as much as 20% at one point, as the Peso was crushed by Trump lurching into the lead; prices have since settled, with the greenback up a more modest 11% to 22.26 pesos per USD
  • USDCAD was not immune from the torrent of volatility; spot hit a low of 1.3265 before moving all the way up to 1.3525 late last evening before settling in the mid 1.3400's
  • The largest risk with Trump is on the foreign policy front, as he has failed to outline any clear policy direction and thus represents uncharted territory…
  • …He may rip up trade deals with Canada and Mexico, cozy up to Moscow or abandon US allies within NATO – or he may not; one simply can't be certain and it seems everything is on the table
  • This is the jarring reality of the early days of the Trump presidency and one that markets seem wholly unprepared to deal with 
  • We expect volatility to remain elevated across assets for the rest of the week with the bias in USDCAD higher and any dips representing a buying opportunity for Canadian corporates who are short US dollars
  • A rate cut from the BoC in December can't be ruled out now given the uncertainty to policy continuity at the US Fed
  • Now would be an excellent time for corporate hedgers to dust off their risk management plans and make sure they have a clear path forward toward achieving their desired budgeted rates 

Charts: (1) USDCAD (2) Presidential Map (3) Senate Map (4) Economic Calendar