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head of a decisive victory for Donald Trump in the US elections 2024, the US election results sparked a sharp rally in the US dollar. This surge pushed the euro to a four-month low and boosted Bitcoin by 5%, setting a record high as European markets opened for live forex trading.
The Republican Party regained control of the Senate and took a lead in the House of Representatives, confirming a “red sweep” that provides Trump with considerable leverage to push his policy agenda forward.
With this victory marking his second term after his 2016-2020 presidency, Trump is expected to continue his pro-business policies, including maintaining low taxes on corporations and the wealthy, as well as increasing tariffs on foreign imports.
“We are going to fix our borders,” Trump said in his first speech after the election results, adding that “America has given a powerful, unprecedented mandate.”
Economists widely agree that Trump’s planned trade tariffs, tax cuts, and tough immigration policies are likely to push consumer prices higher, which could prompt the Federal Reserve to adopt a more restrictive monetary policy, further strengthening the US dollar.
Dollar Strengthens, Euro Faces Worst Day Since COVID-19
The euro currency exchange saw a sharp drop, falling 1.75% to $1.0740 by 8 am CET, heading toward its worst day since March 2020.
The US dollar index, which measures the greenback’s strength against a basket of major currencies, rose by 1.5%. Other currencies, including the Japanese yen, Australian dollar, and British pound, also weakened, with the yen falling 1.5%, the Aussie down 1.4%, and the pound sliding 1.3%.
In Central and Eastern Europe, the Hungarian forint dropped 2.4%, the Czech koruna fell 2%, and the Polish zloty weakened by 1.9%. Meanwhile, the Chinese yuan and Mexican peso also lost ground, falling 1.2% and over 3%, respectively, amid expectations of tougher trade and border policies.
“The market reaction in live forex trading has been a broadly stronger dollar. We expect a prolonged period of dollar outperformance,” said Francesco Pesole, a forex analyst at ING Group. However, Otavio Costa, a macro strategist at Crescat Capital, cautioned that Trump’s potential push for the Federal Reserve to cut interest rates could dampen the dollar’s rally.
“With a Fed likely to cut rates despite inflation showing signs of bottoming out, this is one of the most challenging environments for the USD I’ve seen in my career,” Costa remarked on social media platform X.
US Treasury Yields Surge
US Treasury yields surged overnight, with the 10-year benchmark yield rising 15 basis points to 4.42%. This pushed the spread between the 10-year Treasury and the German Bund to 200 basis points, the largest gap in six months.
The stronger dollar and rising US yields have weighed on commodities. Futures for West Texas Intermediate (WTI) crude oil fell 1.5%, dropping to just under $71 per barrel, while Brent crude also slipped 1.5% to $74.40. Gold edged down by 0.7%, and both silver and copper declined by 2.4%.
US and Global Stock Markets Rise, China Struggles
Trump’s victory sparked optimism in US equity markets, with S&P 500 futures rising by 2%, signalling a potential record-breaking open.
Investors are hopeful that corporate tax hikes proposed by Kamala Harris will be avoided and are downplaying concerns about global growth risks due to higher US tariffs.
In Asia, Japan’s Nikkei 225 surged over 3.4%, while Hong Kong’s Hang Seng and Shanghai Composite Index fell 2.5% and 1.1%, respectively, reflecting concerns over potential trade restrictions on China.
In Europe, Russian stocks outperformed, with the MOEX index climbing 2.5% on hopes that Trump’s administration may ease economic sanctions on Russia.
European markets generally opened higher. The broader Euro STOXX 50 index gained 0.5%, with the Dutch AEX index up 0.8%, France’s CAC 40 rising 0.6%, Germany’s DAX increasing 0.5%, and Italy’s FTSE MIB up by 0.3%. Spain’s IBEX 35, however, was the exception, slipping 0.7%.
European financial stocks led the gains, with companies like Unicredit, Deutsche Bank, Societe Generale, AXA, and BNP Paribas advancing at the open.
