Trump’s North Carolina Victory Boosts Dollar and Yields, Bitcoin Hits New High

The Dollar experienced a significant increase today following the announcement that Republican candidate Donald Trump had won against Democrat Kamala Harris in North Carolina, a key battleground state. This victory is seen as a crucial step toward Trump’s potential return to the presidency, leading to notable movements in the financial markets.

U.S. stock futures showed optimism in response to Trump’s win, with DOW futures rising by over 500 points. Additionally, the yield on 10-year Treasury bonds jumped above 4.4%, highlighting the market's belief that Trump’s policies may influence fiscal changes. However, many traders are still cautious, preferring to wait for more definitive results from critical states before making substantial investments.

In Asia, the reaction from stock markets was mixed. Japan’s Nikkei index surged by over 2% due to positive sentiment regarding a Trump victory, as many investors perceive his economic policies to be favorable for growth and deregulation. Conversely, Hong Kong stocks plummeted more than 2.5% as worries grew over Trump’s potential confrontational approach towards China, which could heighten geopolitical tensions. The stock markets in China and Singapore remained stable but showed signs of caution.

In the foreign exchange market, the Australian Dollar has become the weakest currency, followed closely by the Euro and Yen, as the Dollar's strength continues to dominate. The Canadian Dollar, however, performed well alongside the U.S. Dollar, while the Swiss Franc demonstrated resilience. The New Zealand Dollar has remained stable despite recent employment figures, trading within the same range as the British Pound.

In cryptocurrency, Bitcoin reached a new record high after surpassing the resistance level of 73,812 today. The immediate attention now shifts to the 61.8% projection from the earlier range, aiming for a target of 75,885. A decisive break above this level could accelerate the price further towards a 100% projection of 81,525.

Currently in Asia, the Nikkei is up 2.24%, while Hong Kong's HSI is down by 2.61%. The Shanghai Composite index is slightly up by 0.16%, and the Singapore Strait Times is down marginally by 0.04%. The yield on Japan’s 10-year JGB increased by 0.0421 to 0.971. In the overnight session, the DOW rose by 1.02%, the S&P 500 by 1.23%, and NASDAQ increased by 1.43%, while the 10-year yield slightly decreased to 4.289.

Implications of the Bank of Canada Meeting

In recent Bank of Canada (BoC) meeting minutes released, there was a strong consensus among council members to support substantial growth through a 50 basis points interest rate cut. While a smaller cut of 25 basis points was initially considered, members agreed that a 50 basis point reduction was essential to tackle ongoing economic challenges.

Members expressed confidence that inflationary pressures would diminish, reducing the urgency for a tighter monetary policy. Despite concerns that a more aggressive cut might signal economic issues, an agreement was reached due to the continuing softness in the labor market and the necessity to stimulate growth.

Bank of Japan's Cautious Approach

Minutes from the Bank of Japan's September meeting indicate a careful approach to monetary policy amid global economic uncertainties. The bank maintained its interest rate at 0.25%, with members acknowledging the need to raise rates gradually if Japan's economic outlook aligns with their expectations.

Furthermore, they emphasized high vigilance regarding uncertainties in the global economy, particularly from the U.S., while recognizing stabilization in the Yen as a positive development. This gives them time to evaluate the effects of economic changes before deciding on future policy adjustments.

Japan's Services Sector Contraction

Japan’s services sector entered a contraction phase in October, with the PMI Services index recorded at 49.7, a significant decrease from September's 53.1. This marks the first contraction since June. The PMI Composite index also declined to 49.6 from 52.0, reflecting a downturn in private sector activity for the first time in four months.

Economist Usamah Bhatti noted that the services sector’s performance halted abruptly at the start of Q4, driven by a slowdown in new business inflows, particularly in exports. Businesses still maintain a positive outlook, although overall optimism has dipped to its lowest point in over two and a half years, primarily due to concerns over labor shortages.

New Zealand Employment Trends

New Zealand's labor market has displayed signs of cooling in the third quarter, with employment falling by -0.5%, aligning with expectations. The unemployment rate slightly increased from 4.6% to 4.8%, which, while better than the anticipated 5.0%, still reflects a softer job market.

Moreover, the labor force participation rate declined, indicating fewer individuals actively engaged in the workforce. Wage growth also slowed down, suggesting potential relief in inflation pressures, which may influence the Reserve Bank of New Zealand's decisions on interest rates.

Looking Ahead

Upcoming economic data releases include Germany’s factory orders, Eurozone PMI services figures, and the UK’s construction PMI, with Canada also set to unveil the Ivey PMI later in the day.

Dollar, Economy, Bitcoin