The American currency recorded its strongest increase since 2020 on Wednesday thanks to the victory of Donald Trump. The euro ends the week with a decline of 0.55% to 1.0774 dollars in 5 days. Not only was Donald Trump elected, but the Republicans hold the majority in the Senate and could control the House of Representatives. The measures in the presidential program – increased customs duties, fiscal stimulus and stronger restrictions on immigration – are inflationary, which should limit the Fed’s room for maneuver to ease its monetary policy.
Such a scenario led to a sharp rise in rates this week: the American 10-year is moving around 4.3% after peaking at 4.48% on Wednesday.
Yesterday, the Fed decided to lower its key rate by a quarter of a percentage point, to a range between 4.50% and 4.75%.
This new cut comes after that of half a point in September.
“The central bank will face more difficult decisions in the future, with the re-election of Donald Trump planning to implement major changes to trade, immigration, regulation and fiscal policy,” warns James McCann, deputy chief economist at abrdn. “All of these measures could have obvious implications for the growth and inflation outlook.” The Fed Chairman said he would say no if Donald Trump asked him to resign.
source: AOF
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Belgium
