Donald Trump will be sworn in as the 45th President of the United States at around 17:00 (GMT), Friday January 20th. Traders are anticipating him to make some significant decisions immediately that could affect financial markets and this could throw up some big trading opportunities in markets like USD, Gold, Wall Street and a host of individual stocks. 

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Trump effect

His surprise election victory has spurred stock markets to record highs, forced bond yields higher and driven the US dollar to 14-year highs. Interest rates are expected to rise, perhaps three times in 2017, off the back of an expansionary fiscal policy and a strengthening US economy.

But he’s also caused wild swings in some stock prices thanks to his off-the-cuff tweets and comments to the media. Toyota was slammed for making cars in Mexico, Lockheed Martin for its F-35 fighter programme overspend.

Companies are in fear of a Trump blast on Twitter and are making sure they get on the right side of the president-elect by announcing thousands of jobs and bold new investments in the US.

Even the US dollar is susceptible.

Weaker dollar

Trump began by saying, like all would-be presidents, that he wants a strong dollar. Only, he doesn’t want it this strong.

In an interview with the Wall Street Journal recently Mr Trump remarked that the greenback is too strong and “it’s killing us” – a move that spurred the buck more than 1% lower. We can assume his fast fingers, accustomed to tweeting about stocks, could also end up being used to jawbone the dollar lower when he thinks it’s too strong – a problem I discussed lately in reference to the Plaza Accord

And Trump has many tools at his disposal, in addition to Twitter, to weaken the dollar should he wish, from unilateral or coordinated intervention to non-currency intervention.

What to expect from President Trump

Mr Trump has indicated he will cancel environmental restrictions and slash red tape for businesses, which ought to be positive for a range of US firms. A move to repeal to Dodd-Frank - a gigantic piece of regulation for Wall Street that he has talked about - would be momentous for banks. At the very least financial stocks might be set to enjoy a lighter touch approach to regulation, as well as what looks like a rising interest rate environment that boosts earnings.

But he’s also planning to withdraw from the Trans Pacific Partnership, a move that could undermine global trade.  And he has said he will end price gouging by drug companies, with comments in his recent press conference sending biotech and pharmaceutical shares spinning.

Traders should keep a close watch on what kind of executive orders – laws that do not require Congressional approval - that the new president makes in his few days.

Has the Trump bump run its course?

This really is the million dollar question for traders looking at US stock indices, gold and the US dollar. Again it is likely to be answered in the first few weeks of the presidency.

The dollar and US Treasury yields actually peaked around the middle of December and have eased off those highs since as investors have fretted over the real implications of a Trump presidency. Gold has slowly edged $100 higher from its December 15th trough. It’s no coincidence that this was immediately after the Fed raised interest rates – a case of buy the rumour and selling the fact to some extent.

Chart: Gold prices have rallied since the Fed raised rates in December

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Once in the White House we should learn fairly quickly whether Trump makes good on the promises or whether this remarkable rally in equities at the expense of bonds was a case of markets being overly optimistic.

Market Event: Donald Trump’s inauguration as the 45th President of the United States of America, Friday January 20th. Swearing in ceremony from around 16:30 (GMT, with the Oath of Office around 17:00.

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