FxWirePro: Trump and Brexit factors bolster USD and EUR vulnerable, while 2016 likely to end with resurgence of BTC/USD

Bingo..! Bitcoin has struck back again to highs of 953 levels (BTCUSD) which is the highs of 2016.

After slipping as low as $358 during the beginning of the year, cryptocurrency more than doubled over the next 5 months, with a big portion of the gains coming through a parabolic rise occurring between late May and mid-June. Bitcoin retreated over the following six weeks but has been steadily rallying since, and on last Wednesday struck at $800 for the first time since February 2014.

This exponential surge has been attributed to the several different factors. Namely, the prime factor being euro has been vulnerable owing to the Brexit referendum - both in terms of the financial volatility it caused for the U.K., and the fears it induced about the Eurozone's stability, and indeed ranks high on the list. This would imply that it’s been worthwhile accounting Bitcoin's giant mid-year surge happened before the June 23 Brexit vote (admittedly amid rising fears of a "Leave" vote) rather than after it.

Moving on the dollar, although FED has provided the substantial cushion to USD with its hawkish tones of monetary policy. Due to the Donald Trump's presidential election, the dollar continued to get a booster in conjunction with FED, whereas Euro is still clouded with Brexit and French & German polls, as a result, EURUSD heading for parity.

Ever since the Trump’s US presidential election victory in November, the DXY has risen over 10.3% so far, major backed by higher front-end core yields as markets have repriced a reflationary outlook from expansionary US fiscal policy.

You could expect the prospects of expansionary fiscal policy in the US under Trump regime that likely drives US interest rates higher and therefore strengthen the dollar further. Trump is also likely to protect US manufacturing in order to generate more and more employment and this could actually narrow US trade deficit.

Uncertainty is, however, unlikely to lift FX volatility further until the environment turns risk-off. Trump’s victory has so far not been conducive to such a shift. 

The threats it fuelled about a Trump governance possibly trailing undermining economic and fiscal policies in the US, can also not to be disregarded, Bitcoin is up 40% ever since then (Nov), though as with Brexit, some Trump-related Bitcoin buying appears to have happened before this election.