It has been yet another volatile week on the market. Over the past few months the markets seemed to have priced in a Clinton win for the Presidential elections in the US, which was completely overturned when Donald Trump unexpectedly won the elections on Tuesday night.
The markets haven't really known how to react to this as they weren't expecting Trump to win and are unsure about how his Presidency will work moving forward. It seems his campaign was about connecting with people's emotions, but his actions moving forward may not have the same rhetoric.
One positive so far is that the pound has rallied against all major currencies since the election- GBP/EUR exchange rates crossed 1.16 and the GBP/USD rate hit above 1.26. This is the most we have seen the pound gain since the EU Referendum.
The reason for this sterling strength was the expectation that a Trump Presidency may be positive for the UK and Brexit. Trump previously backed Brexit and has already met with Nigel Farage over the weekend to discuss plans moving forward. It has also been said that he has spoken with Theresa May and assured the British PM that Britan is "at the front of the cue" for a trade deal with the U.S.
The recent strength we've seen for the pound has been purely based on speculation, as nothing can actually happen yet (Trump doesn't get inaugurated until January). We may see this short-lived however, as there are still many events coming up that have the potential to move the markets, such as the Italian Referendum and the potential Fed rate hike in December.
On Monday night, Theresa May will give her first speech on foreign policy since becoming PM. This will be interesting as it will be her first public analysis of Trump's victory and will give us some insight of the relationship planned for the UK and US moving forward.