Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Trump win drives greenback to highs
The US dollar surged higher after Donald Trump won a historic second term as US president with the USD index hitting the highest level since early July.
The USD index’s 1.7% gain was the biggest one-day gain for the index since March 2020.
US equity markets also jumped higher with the Dow Jones up 3.6%, S&P 500 up 2.5% and the Nasdaq up 3.0%.
The USD also perfectly tracked Trump’s performance in the election count with expectations that tax cuts and tariffs might drive inflation and cause the Federal Reserve to become less favorable towards rate cuts. In 2016, in Trump’s last election victory, the USD index gained 9.0% over the December quarter, before later reversing sharply
Trade-exposed currencies hit hardest
The expectation for tighter controls over trade including new tariffs saw the trade-focused currencies hardest hit.
The EUR/USD fell 1.8% while the AUD/USD lost 1.0%.
The USD/CNH jumped 1.5% while USD/SGD gained 1.5%.
The USD/JPY led the moves on Wednesday with the pair up 1.9% in expectations that the US Fed would keep rates higher for longer.
US Fed due
Speaking of the Fed, the upcoming decision, due at 6.00am AEDT on Friday, is still expected to see the US central bank cutting rates by 25bps.
However, after yesterday’s price action, this is no longer a “sure thing” (although at 99.8%, it’s pretty close). Source: Bloomberg.
However, more importantly, Jerome Powell’s press conference will be closely scrutinized for any signs the Fed is now less likely to hike rates. If so, the US dollar can gain further.
Aussie, euro hit hardest on trade worries
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 November
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
