Donald Trump is heading to the White House, causing some excitement on global markets. Here’s a summary of what investors need to know about the current trajectory of the markets.
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The euro collapsed against the US dollar as Donald Trump declared victory in the presidential election. The currency lost nearly 2 cents against the dollar to hit a four-month low in 8:40 a.m. CET.
During this time, futures indicate higher open for major European indices, including the pan-European Stoxx 600 and the German DAX, reflecting movements on Wall Street.
The dollar soars, dragging the euro and emerging market currencies down
Financial markets are experiencing increased volatility as official results approach, with the US dollar index hitting its highest level since July. This increase put downward pressure on other G10 currencies and emerging market currencies.
The dollar index jumped 1.5%, its biggest rise since March 2020, when the pandemic began. The weakness of the euro has been particularly evident, as factors such as increasing customs duties, anti-climate policies and potential interest rate hikes in the United States threaten the economic stability of the Eurozone.
A US-EU trade conflict could exacerbate the region’s economic outlook, likely prompting the European Central Bank to accelerate rate cuts.
Moreover, escalating geopolitical tensions between the United States and China could further dampen Chinese economic growth and prolong sluggish consumer demand, which would impact European exports to China, particularly in the luxury goods sector.
“Europe is certainly not reacting particularly well to the news, with investors appearing somewhat spooked by the potential for tariffs and the greater geopolitical uncertainty that a Trump presidency is likely to bring,” wrote Michael Brown, strategist senior researcher at Pepperstone, in an email.
Among emerging market currencies,The Mexican peso fell almost 3% against the dollarmarking a two-year low, as traders hedge against the growing likelihood of trade barriers between the United States and Mexico. Likewise, the Chinese yuan fell more than 1% against the dollar due to concerns about future trade relations between the United States and China.
Iranian currency fell on Wednesday at its historic lowwith the new presidency of Donald Trump signaling new challenges ahead for Tehran which remains locked in the wars raging in the Middle East.
The rial traded at 703,000 rials to the dollar, according to traders in Tehran. The rate could still change during the day. The Iranian Central Bank could flood the market with new hard currencies to try to improve the rate, as it has done in the past.
“A clear Republican victory (in Congress and for the presidency – Editor’s note) could be bad news for the rest of the world. While many Republican policies are exciting and popular in the US, the promise to immediately erect trade barriers is a global concern,” Michael McCarthy, market strategist and commercial director at Moomoo Australia, told Euronews.
Wall Street recovers, bonds extend losses, bitcoin hits all-time high
US stock markets are also rallying on expectations of a Trump victory, with the S&P 500 nearing a new high.
Trump’s promises to cut corporate taxes, ease tax policies and lower regulations are likely to boost liquidity and benefit stock markets.
However, these policies give rise to concerns about rising inflation, public debt and trade deficitwhich could prompt the Federal Reserve to raise interest rates and negatively impact stock markets.
Government bonds extend their losses as markets anticipate higher inflation and interest rates in the United States. “Trump Trade” has significantly influenced the rise in US Treasury bond yields, with expectations that his policies will lead to higher inflation, which will encourage the Fed to slow the pace of cuts rate. Bond yields, especially those on short-term bonds, often reflect market expectations for changes in interest rates.
ADVERTISEMENTBitcoin also hit an all-time high above $75,000 (68,847 euros), as Trump’s trade continues to fuel the rise in cryptocurrencies. Mr. Trump’s pledge to make the United States the “cryptocurrency capital of the world” has contributed to the rise of bitcoin, which is increasingly emerging as a potential global financial force.
The price of gold has collapsedas the need to cover election-related risks continues to diminish. The spot gold price fell $15 an ounce to its lowest level in two weeks.
