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By the time the exodus had come to a halt in London yesterday morning the USD had fallen by 0.7% from its position against the EUR at New York's Tuesday close. The downward move ran out of steam and began to reverse as investors re-evaluated what a split Congress would mean for the economy, interest rates and the USD itself. There will likely be no more sweeping tax cuts but those already in place will not be rolled back.  Investors will find out today whether or not the Federal Open Market Committee sees any reason to divert from its policy-tightening program as a result of the election; they expect the answer to be no. That being so, US economic circumstances today are not markedly different from the situation prior to the midterms, and the USD is no more obviously a buy or a sell.  


The euro was more reactive than proactive on Wednesday. It was the market's attitudes to the USD that drove the action. Having looked promising during the early London session the EUR had to give it all back during the New York day.  Investors are not, after all, wildly enthusiastic about the EUR at the moment: they were happy to buy it as an easy alternative to the USD but just as content to offload it as sentiment to the US currency swung from negative to neutral. The EUR is 0.7% lower on the day.  It received no obvious help from the European Central Bank's Economic Bulletin, published this morning even though the bank offered a positive view of broad-based growth and labor market strength.


Just as the CAD had shared the USD's pain on the way down in the immediate aftermath of the election result, it shared its joy during the New York session. The two were unchanged on the day against one another. Investors paid no attention to the day's sole Canadian statistic, the Ivey purchasing managers' index, even though it came in 61.8, substantially above the forecast 50.9.


As the USD pressed ahead with its recovery the GBP was left behind, falling by a net 0.4% on the day.  The damage to it was less than to the EUR because, once again, investors were inclined to buy into the story that a Brexit deal is at hand.  The latest on that front is that the prime minister "invited" senior ministers to read the draft text of a Brexit Withdrawal Agreement which she intends to put before Parliament. Parliamentary approval would not guarantee the EU's imprimatur but it would at least move the process along and, for that, investors are in approval.


As investors regained their confidence in the USD they moved further away from the safe-haven JPY, which went down by 0.6% on the day. The yen's day was further spoiled by some unhelpful domestic economic data. Bank lending, a barometer of consumer demand, grew by only 2.2% in the year to October instead of the forecast 2.4%.  Machinery orders were down by a monthly 18.3% and 7.0% lower on the year. The Ministry of Finance reported that buying of US Treasuries by Japanese investors jumped to $20bn in September, the biggest monthly total since July 2016. 

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