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USD/JPY dropped 240 pips in about 30 minutes as US presidential election results begin to emerge. Donald Trump is drawing closer to winning some close battleground states increasing his odds of winning the overall election.

Though we can’t say for sure how the market will react, this type of market movement is hinting that a Donald Trump presidency may signal risk aversion, US Dollar weakness, or possibly a fall in rates. USD/JPY has been correlated to each of those three outcomes from time to time.

What is particularly interesting to me is that the Fed funds futures were showing a chance of a December 2016 rate hike in the low 80’s. Would a Trump presidency pull the rate hike off the table and lead to broad based US Dollar weakness?

Other JPY markets may feel the effect of USD/JPY weakness like EUR/JPY, GBP/JPY.

USD/JPY Falls Hard as US Election Results Pour In

For a medium term outlook on USD and JPY, download our quarterly forecast here.

Suggested Viewing: Risk Appetite is Unlikely to Last Regardless of Election Outcome