Greater Volatility Expected In The Trump Era

U.K. Volatility, Euro, Yen

Today the British pound fell to $1.1986 for the first time since October as U.K. Prime Minister, Theresa May, states her plans to lead Britain out of European Union’s single market. Adding further volatility, U.S. President-Elect Donald Trump predicted that Brexit will be a success and encouraged and suggested that other countries may follow suit.

The Euro also dropped to a low of 1.0578, recovered slightly and fizzled out at 1.0060 as the trading day closed. The Yen extended gains against the Greenback as it stands poised for its longest winning streak since June, touching the 113.61 level for the first time since early December.

U.S. markets were closed Monday due to a holiday, which kept the Forex market activity slow after the European session.

Big Swings Ahead

If Mr. Trump’s first press conference sets a precedence for what will happen during his presidency, he will wield great influence over the Forex market during his speeches. This means we are in for big swings in the Forex market this year.

Bloomberg reports that the one-week implied volatility on the euro-dollar surged the most in a month after Mr. Trump’s press conference on January 11th. With his political agenda still up in the air, the market can swing in any direction as his policies become more apparent.

Brexit negotiations and European elections add further uncertainty to the markets.