Trump’s Twitter Tantrum Causes Dollar to Drop

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Market Drivers November 28, 2016
Dollar under pressure as week starts
EZ Draghi on deck
Nikkei -0.13% Dax -0.79%
Oil $46/bbl
Gold $1189/oz.

Europe and Asia:
EUR EZ M3 4.4% vs. 5.5%

North America:
EUR Draghi Speaks 10:00

Dollar came under heavy profit taking pressure in Asian and early European trade today with USDJPY dropping especially hard as the pair tumbled more than 150 points of the session highs hitting a low of 111.35 before finally rebounding above the 112.00 figure.

There was no major news to trigger the drop in prices, although some traders used the news of a recount in Wisconsin as the possible trigger for the wave of profit taking. Over the long holiday weekend the Green Party candidate Jill Stein was able to raise more than $5 Million to file for recounts in 3 key states of Wisconsin, Michigan and Pennsylvania. Ms. Clinton’s campaign joined the effort. Although Ms. Clinton lost those states by a combined 100,000 votes while winning the popular vote by more than 2 million, very few experts believe that recounts will be able to overturn the Electoral College win of Mr. Trump. This is especially so because Pennsylvania, Mr. Trumps largest margin of victory has no paper ballots against which the electronic votes may be compared making the prospect of any voting irregularities even more difficult to detect.

Nevertheless, over the week-end Mr. Trump broke out in a furious tweetstorm deriding the recount effort as a “scam” and claiming without any evidence whatsoever that he would have won the popular vote because Ms. Clinton received 3 Million “illegal” votes. The blatant lie without any proof – and one that has been roundly challenged by all of the country’s voting experts – was unprecedented in American politics and may have made some market traders doubt Mr. Trump’s stability.

Certainly it was his response to Ms. Stein’s actions rather than the prospect of recount itself that exacerbated the story far beyond its significance. We may be just at the start of a new dynamic in capital markets where Mr. Trump’s Twitter account plays an outsized and highly unconventional role in moving prices.

Even without Mr. Trump’s Twitter tantrum the dollar was due for a correction after staging one of its strongest rallies in years over the past two weeks. Today, with no data on the docket the North American trade may continue to see good two way action, although the greenback may not drop any further unless equities take a tumble as well, but for now the 1.0700 level in EURUSD and the 111.00 figure in USDJPY still appear within reach to dollar bears looking to capitalize on the correction.

Boris Schlossberg
Managing Director

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