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Immediately following the US election results and Donald Trump’s win, the dollar made gains against other currencies. The FTSE 100 index also went up on Wednesday afternoon by 1%.
The positive moves appear to be based on Trump’s plan to cut taxes and raise tariffs, as these will cause inflation to increase and reduce the speed at which interest rates are cut.
US interest rates staying higher for longer will mean that investors get a better rate of return on savings and investments they hold in dollars.
However, there are concerns that the UK economy could be detrimentally affected by Trump’s proposals around trade, and lead to a slow-down in growth.
Financial markets are of course fickle, so by the time you read this article things could have changed again. However, it is useful to maintain a broad awareness of what is happening in the financial markets.
Financial markets influence the price of commodities, currency exchange rates and interest rates. So being aware of trends may help you to manage cash flow for increasing costs, or it may help you to time when you borrow so as to get a lower interest rate.
Consumer spending power and confidence are also affected by the same factors that influence the financial markets. So, trends in the financial markets, particularly when you can identify the reasons for them, can give you an idea of how your customers are thinking. These insights can help you to prepare and adjust as needed.
