The "Trump Trade" regains traction. US equity futures continue to rise, bonds are edging lower, and both the dollar and cryptocurrencies are rallying as the Republican candidate is poised for a return to the White House and the GOP secured the Senate majority.
Bitcoin skyrockets. The leading cryptocurrency has reached the USD 75,000 handle for the first time in history, marking a year-to-date increase of approximately 80 percent. Ahead of the upcoming election, Trump has positioned himself as a strong advocate for cryptocurrencies and decentralized finance, pledging to create a favourable regulatory environment contrasting with the authorities' current cautious and restrictive stance.
The US dollar rallies as investors brace for escalating trade tensions and look forward to potential tax cuts and growth-friendly, pro-inflationary policies. The DXY index is up over 1.5 percent, reversing two days of declines and reaching levels last seen in July. Among G-10 currencies, the JPY and EUR are the weakest performers. The EUR/USD rate plummets towards 1.07. Conotoxia fintech is sceptical about whether this move has much room to run. With the elections behind us, financial markets are likely to shift their focus to the Fed's monetary policy outlook soon. Investors may be underestimating the scale of potential FOMC rate cuts in 2025.
A potential increase in general tariffs on Chinese imports - from an average of 10 percent to as high as 60 percent - in the aftermath of Trump's victory bodes ill for the struggling Chinese economy and adds to a bearish yuan case. As far as the EM space is concerned, the Mexican peso leads the drop. USD/MXN traded close to the 20.80 mark, advancing to the highest levels in over two years. Other pro-cyclical, high-yielding currencies, such as the South African rand, are trade heavy, tracking declines in base metals and energy commodities prices. Meanwhile, the Polish zloty remains under pressure amid rising geopolitical uncertainty and Trump's unclear stance on the war in Ukraine.
The bullish trend on Wall Street is likely to remain in place through the end of the year. In 2016, Trump's unexpected win spurred the S&P 500 to rise around 15 percent within four months. However, a similar rally should not be expected this time. While S&P 500 futures are up over 2 percent, investors elsewhere appear cautious, bearing in mind that lifting import tariffs is central to Trump's economic agenda. Optimism is notably weaker in European equity markets, with the EuroStoxx 50 posting a modest gain at the open.
This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.
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25 Oct 2024 9:31
Yuan caught between stimulus and US elections: USD/CNY risks skewed to the upside
The "Trump Trade" regains traction. US equity futures continue to rise, bonds are edging lower, and both the dollar and cryptocurrencies are rallying as the Republican candidate is poised for a return to the White House and the GOP secured the Senate majority.
Bitcoin skyrockets. The leading cryptocurrency has reached the USD 75,000 handle for the first time in history, marking a year-to-date increase of approximately 80 percent. Ahead of the upcoming election, Trump has positioned himself as a strong advocate for cryptocurrencies and decentralized finance, pledging to create a favourable regulatory environment contrasting with the authorities' current cautious and restrictive stance.
The US dollar rallies as investors brace for escalating trade tensions and look forward to potential tax cuts and growth-friendly, pro-inflationary policies. The DXY index is up over 1.5 percent, reversing two days of declines and reaching levels last seen in July. Among G-10 currencies, the JPY and EUR are the weakest performers. The EUR/USD rate plummets towards 1.07. Conotoxia fintech is sceptical about whether this move has much room to run. With the elections behind us, financial markets are likely to shift their focus to the Fed's monetary policy outlook soon. Investors may be underestimating the scale of potential FOMC rate cuts in 2025.
A potential increase in general tariffs on Chinese imports - from an average of 10 percent to as high as 60 percent - in the aftermath of Trump's victory bodes ill for the struggling Chinese economy and adds to a bearish yuan case. As far as the EM space is concerned, the Mexican peso leads the drop. USD/MXN traded close to the 20.80 mark, advancing to the highest levels in over two years. Other pro-cyclical, high-yielding currencies, such as the South African rand, are trade heavy, tracking declines in base metals and energy commodities prices. Meanwhile, the Polish zloty remains under pressure amid rising geopolitical uncertainty and Trump's unclear stance on the war in Ukraine.
The bullish trend on Wall Street is likely to remain in place through the end of the year. In 2016, Trump's unexpected win spurred the S&P 500 to rise around 15 percent within four months. However, a similar rally should not be expected this time. While S&P 500 futures are up over 2 percent, investors elsewhere appear cautious, bearing in mind that lifting import tariffs is central to Trump's economic agenda. Optimism is notably weaker in European equity markets, with the EuroStoxx 50 posting a modest gain at the open.
See also:
Yuan caught between stimulus and US elections: USD/CNY risks skewed to the upside
EUR/USD drills lower as ECB cuts and US retail sales beats estimates
USD trades firm as hopes for aggressive rate cuts fade
The Swiss National Bank cuts must rely on FX interventions to dent the strength of the franc
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