Risk Rally Continues as Gold Gets Crushed

European equity markets are poised to open higher on Monday as investors pick up where they left off last week, with risk assets catching strong bids and safe havens getting crushed.

I can’t help but think people are once again getting a little carried away. A Trump Presidency has suddenly gone from being the least desirable outcome, to say the least, for the markets to being responsible for the Dow soaring to record highs and bullish hysteria sweeping through the markets.

EM Trump Slump or Trump Dump

While he may appear to be dialing down some of his more radical protectionist policies which allows people to focus more on his pro-growth plans, markets may still be getting a little ahead of themselves. We still need to wait and see how he’s going to work with Congress and how much fiscal slack he’s going to be afforded in order to fund these ambitious stimulus plans.

For now it will be all about the transition and who is going to be given the key positions in his team, which we should find out more about in the days ahead. With the election now behind us, investors may now turn their attention elsewhere, with the UK being a particular focus as we get data on retail sales and the labour market, while BoE Governor Mark Carney will also appear before the Treasury Select Committee to testify on the inflation report.

We’ll also get retail sales data from the US as well as numerous appearances from central bankers which will be interesting as markets continue to price in a December rate hike and potentially a faster pace of tightening thereafter.

Week Ahead – Trump Reflation Comments Boost USD

For now, it seems markets will remain in a risk on environment which has seen Gold get crushed in recent days. A combination of risk appetite, faster rate hike expectations and a stronger dollar has battered the yellow metal, taking it below $1,250 on Friday and on course to test $1,200 which would take it to its lowest level since February.

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