Dollar soars as Trump nears election win; euro, sterling, yen all retreat sharply

The U.S. dollar soared Wednesday, set for its biggest one-day rise since March 2020, as Donald Trump closed in on presidential victory, while a Republican clean sweep of Congress also looked likely.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies,rose 1.4% to 104.737, after earlier climbing as high as 105.237, a four-month peak.  Dollar soars as Trump nears White House return

Republican candidate Donald Trump declared himself the victor in the US presidential election earlier Wednesday, despite the race yet to be officially called, saying the win gives him a "powerful mandate" to enact his various economic policies.

The Republican party has also won a majority in the Senate, and was also seen on course to also win the House of Representatives.

A Republican sweep in Congress presents a much easier path for Trump to enact major policy changes, with his tariff and immigration policies seen as inflationary by analysts, buoying the dollar.

“Trump trades are in full swing as the counting of US ballots continues,” said analysts at ING, in a note. “If the growing consensus for a Republican clean sweep ends up materialising, we expect a prolonged period of dollar outperformance.”

The Federal Reserve also meets this week, concluding its gathering on Thursday. Markets have been positioning for another rate cut, this time by 25 basis points instead of the jumbo 50-basis point reduction seen in September. Euro slumps 

In Europe, EUR/USD slumped 1.5% to 1.0762, falling to its lowest level since early July as a second term for Donald Trump as US president becomes more likely.

“The euro has so far proved the weakest of the G10 currencies overnight and you can see why,” ING added. “The expectation is that Donald Trump extends his trade war from just China in his first term more broadly in his second term. This at a time of stagnant eurozone growth and self-reflection – especially in Germany – as to its future business model. Plans to export its way out of stagnation are no longer an option for the eurozone.”

This euro weakness comes despite Germany's services sector seeing a slight uptick in business activity in October, reaching a three-month high, earlier Wednesday.

The PMI rose to 51.6 from 50.6 in September, marking the first acceleration in growth in five months. 

GBP/USD fell 1% to 1.2917, with the Bank of England likely to authorise another rate cut of 25 basis points on Thursday, its second cut following its first reduction in the cost of borrowing in four years in August.

Before last week’s budget a cut was seen as a near certainty, but the bigger than expected scale of Government spending and borrowing revealed has created some uncertainty. Asian currencies face Trump woes

USD/JPY soared 1.6% to 153.95, to an over three-month high, as the Trump victory drew nearer. 

Weakness in the yen also kept traders on edge over potential currency market intervention by the government, following recent verbal threats from ministers.

USD/CNY climbed 0.8% to 7.1579, with the yuan retreating as Trump has vowed to impose steep tariffs against China if reelected, presenting a tougher outlook for the yuan.

Focus this week is also on a meeting of China’s National People’s Congress, where the government is widely expected to approve more fiscal spending for the coming years. 

AUD/USD fell 0.9% to 0.6579, with the Australian economy seen suffering as a consequence of Trump’s potential tariffs on China, given Australia’s trade links with the Asian giant.

 

Source: Investing.com