How a Confirmed Democrat Victory has Boosted the Markets
As a violent mob of Donald Trump fans stormed the U.S. Capitol building last week, it was almost easy to overlook the fact that Joe Biden’s Presidential victory was officially confirmed by the US Senate.
Perhaps even more importantly, embattled incumbent Donald Trump has finally committed to a peaceful transition of power, although he stopped short of conceding defeat and confirmed that he wouldn’t attend Biden’s inauguration on 20th January.
But how did the markets respond to this development, particularly from the perspective of equities and the USD?
Markets Power Higher as Biden’s Win is Certified
In the immediate aftermath of Biden’s early-hours confirmation (and the conciliatory approach taken by Trump after the Capitol siege), there’s no doubt that the vast majority of markets responded positively.
Equity markets certainly powered higher, for example, while oil also made substantial gains after what had been an incredibly turbulent 2020.
Bitcoin also soared to a new high above $40,000 per token in the wake of Biden’s confirmation, as US dollar debasement conspiracy theorists invested heavily in the market leading cryptocurrency.
As for the dollar itself, this also rose overnight from a very solid foundation, with the news of Biden’s confirmation being supported by better-than-expected headline numbers from December’s ISM PMI and Initial Jobless Claims data.
According to Oanda senior market analyst Jeffrey Halley, the very sensitive USD/JPY also climbed by 0.75% to 103.80 at the close of trading. Of course, this trend was also supported by an increase in Covid-19 cases in Japan and the depreciation of the yen, but it’s important to note that greenback also rose against the previously omnipotent New Zealand dollar.
More specifically, the AUD/USD fell by 0.45% to 0.7770 after Biden’s triumph, while the Kiwi declined by 0.67% to 0.7260.
What About Bitcoin and Oil?
As we’ve already touched on, oil also inched higher during this period, which should come as no surprise given the asset’s close links to the US dollar.
The market was also helped by unilateral production cuts in Saudi Arabia, which helped to maintain a more viable balance between supply and demand and saw both Brent and WTI creep higher.
More interesting trends have been observed in Bitcoin’s price movements, which as we mentioned earlier, scaled the heights of $40,000 for the first time as fears about the debasement of the greenback gathered momentum.
This also continued a trend that was evident throughout 2020, as Bitcoin remained relatively immune to a declining macroeconomic climate and emerged as a secure store of wealth for investors against the backdrop of coronavirus.
However, the first two weeks of January have seen Bitcoin crash and fall back to nearly $30,000 per token, while further losses are predicted throughout 2021.
Incredibly, this means that Bitcoin may once again emerge as a trade rather than an investment in the near-term, which is sure to change the outlook of investors in the process.
This article has been published in accordance with Socialnomics’ disclosure policy.