Trump Trade continues as dollar hits fresh highs

* S&P 500 and Dow post record closes, Trump linked stocks advance

* Tesla up another 9%, risen five straight days and over 44% over this period

* Gold falls to lowest in nearly two months as USD jumps

* Bitcoin tops $86,000 on crypto euphoria over Trump win

FX: USD broke to fresh highs and levels last seen in July. The bull move took out the minor Fib retracement level (78.6%) of the April to September down move that sits at 105.13. Volumes were thinner due to the Veteran’s Day holiday in the US. There is a plethora of Fed speakers this week, including Chair Powell, which comes after last week’s meeting. Fresh CPI data is published on Wednesday.

EUR is suffering from a double whammy both sides of the Atlantic. Trump and future tariffs offer major downside risks to the eurozone economy, while political uncertainty in Germany and France too is not helping the single currency. It fell to near seven-month lows with bears eyeing up the April trough at 1.0603. The key question is when tariffs might kick off, with many not actually expecting them to the latter part of 2025.

GBP fared mid-pack in the majors versus king dollar. The less dovish, slightly more hawkish BoE meeting from last week is underpinning some support for sterling. Prices are bang on a support zone at 1.2833/62. But id we lose this, we could fall sharply to 1.2729. We get a bunch of UK data this including wage growth and GDP, plus a speech from Governor Bailey on Thursday evening UK time.

JPY moved up to resistance around 153.40. Last week’s highs are at 154.69/70. We had comments from a BoJ official continuing to highlight a lack of urgency for immediate hikes.

AUD outperformed on the relative risk tone as the aussie held above Friday’s low at 0.6557. USD/CAD moved north to long-term resistance at 1.3946.  

US Stocks were mixed but we still saw all-time highs in the S&P 500 and Dow. The S&P 500 settled 0.1% higher at 6,001. The tech-dominated Nasdaq 100 lost 0.05% to finish at 21,107. The Dow finished up 0.69% at 44,293. Tech led the losses while consumer discretionary and financials were the clear winners. Tesla again marched higher post-election as founder Elon Musk was seen as a key architect behind Trump’s victory. That is despite the new President not being an electric vehicle fan who has promised to eliminate tax credits on EV vehicles purchases. Nvidia’s price target was raised to $160 from $150 by Morgan Stanley due to better gross margins expected in October. The stock closed just off its recent record high from Friday.

Asian stocks: Futures are mixed. Asian stocks were muted after disappointing China stimulus and softer China inflation numbers. The ASX 200 moved down on commodity weakness. The Nikkei 225 traded indecisively though held up by a soft yen. The Hang Seng and Shanghai Composite both struggled on the new fiscal measure announcements with China data and the Trump election victory obviously still lingering in the background.

Gold tumbled below the 50-day SMA for the first time since July. That sits at $2647. The next support level is at $2594 – the next Fib level (38.2%) of the May to October move.

Day Ahead – UK Jobs

It’s the middle of the month so we get the usual data dump from the UK. First up are the jobs figures. The unemployment rate is set to tick fractionally higher again above 4%, though markets and the Bank of England know these numbers are still unreliable amid ongoing sampling issues. Surveys show a slowdown in broader economic growth and sentiment. Wage growth is set to decline further too, though this is partly due to base effects. The regular pay growth rate is expected to drop from 4.9% to 4.7%, but a rise in the total pay growth rate is predicted from 3.8% to 3.9%.

Last week’s BoE meeting sent a signal of a gradual cutting cycle with a marginal hawkish bias given the inflationary budget. However, the MPC did not want to spook markets following the significant market reactions we saw post-budget. Expectations are for the bank to remain on hold at the December meeting and stick to its “gradual approach”.

Chart of the Day – EUR/GBP drops below major support

The BoE delivered a second hawkish cut last week as per above. The expansionary Labour budget lifted the BoE’s GDP and CPI forecasts. It also forced Governor Bailey to backtrack on his earlier call a few weeks ago for an activist approach on rate cut. Instead, he sounded more cautious on future reductions. The economic picture between the UK and Europe has diverged again to the benefit of the pound.

The EUR/GBP 0.83 support zone is being tested once more. The picture remains fragile with UK data, political upheaval in Germany and pricing for the ECB and BoE December meetings being critical for direction. If we decisively lose 0.83, then next long-term support sits at 0.8202, with nothing after that for some time.

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