This week: Donald Trump takes the White House and markets react; the Keystone Pipeline could be back on course; India demonetised the INR 500 and 1000 notes; and Samsung has a nightmare week.
Last week we predicted that Trump could take the White House in a Brexit-style shock victory, and then explained how the election could impact the currency exchange market. As it turned out we were right on two fronts: the polls were wrong and Trump took the White House, and markets reacted exactly how we predicted. Initially the USD fell against the majors (including the JPY), while the CAD fell against the USD, the MXN and CNY plunged, and gold prices shot up. Stock markets around the world meanwhile initially fell. Overall the initial market reactions were far less dramatic than those which followed the Brexit vote, thanks in part to a swift concession from Clinton and an unusually measured and Presidential victory speech from Trump.
Markets Rally and GBP Takes Off
Despite initial volatility by Thursday the Dow rose 218 points to hit a new high of 18,807, and finished the week with a total gain of 5.4%. The S&P 500 and Nasdaq both rose 3.8%. The GBP was one of the biggest currency winners following Trump’s election. The pound climbed above $1.26 for the first time in more than 5 weeks after its best two-week performance in more than 8 years. In contrast, last month the GBP was one of the world’s worst performing currencies.
TSX and Loonie Fall
The loonie and TSX suffered a double blow this week. The election of Trump caused some initial panic, but the final nail in the CAD’s coffin this week was the news that the world’s oversupply issue was likely to continue – keeping oil and gas prices low. The loonie fell to below USD 0.74 and the TSX lost 188 points to close at 14,555.
Key to Canada and US Relations
Following Trump’s victory news quickly emerged that Senate Majority Leader Mitch McConnell asked Trump to put the Keystone Pipeline back to the top of the agenda. Obama blocked the Keystone Pipeline throughout the course of his presidency. Approval of the plan would allow the TransCanada Corp to build a pipeline to bring 800,000 barrels of crude oil from the oil sands to US refineries on the Gulf of Mexico. According to proponents the Keystone pipeline could create up to 20,000 jobs, however environmentalists on both sides of the border oppose the plan. Prime Minister Justin Trudeau had failed to convince Obama to allow the Keystone Pipeline to go ahead, and has reasserted his support for the project since Trump’s win.
Indian Currency Worthless
In an effort to tackle so called “black currency” and counterfeit bills the Indian government has announced that all INR 500 and 1000 notes will be scrapped. Holders of those notes have from November 10th to December 30th to deposit the notes. After the 30th of December there will be a special process to deposit the notes requiring government ID. Since Modi took power India has uncovered almost US$20 billion of “black money”. The term “black money” refers to currency which is not officially accounted for, nor being taxed appropriately. It is often linked to corruption and also often includes counterfeit bills.
The only good news for Samsung last week was that everyone was distracted by Trump’s election. Samsung was forced to recall 3 million washing machines in Canada and the US. Things got worse as reports emerged that the Samsung J5 smartphone may also be prone to exploding, this is after the company’s massive recall of the Samsung Galaxy Note 7 earlier this year.
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