Originally published at: This week in charts: currencies in the spotlight – InvestEngine Insights
Trump’s proposed tariffs on imports, tax cuts, and reduced immigration are all likely to push costs and prices in the US up – which raises inflation. His election therefore resulted in an increase in expectations for US interest rates, which had the knock-on effect of causing the US dollar to rise, as short-term currency movements are correlated with interest rate differentials between countries. This has undone much of the gains sterling had made against the dollar this year.
A Trump administration is also expected to be supportive of the crypto industry, and now that the Republicans will have control of the House as well as the Senate, there is a higher likelihood of favourable legislation being passed. This optimism has propelled Bitcoin to a new all-time-high of over $90,000.
This crypto surge has meant that funds invested in Bitcoin ETFs in the US have started to overtake gold funds. At $41 billion, the assets under management (AUM) of the largest Bitcoin ETF, the US-listed iShares Bitcoin Trust (IBIT) has surged past the AUM of the iShares Gold fund from the same fund company (IAU, $32 billion). Funds directly investing into cryptocurrencies are banned from being sold to retail investors in the UK.
Finally, US inflation figures were released this week. Headline CPI rose to 2.6%, which was an increase from last month’s 2.4%. Once volatile food and energy prices were stripped out, “core” CPI held steady at 3.3%, with both figures indicating the Federal Reserve had more work to do to bring inflation under control.
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