The dollar saw its largest single-day gain since March 2020, fueled by Donald Trump’s victory in the U.S. presidential election. Trump’s win over Democrat Kamala Harris, alongside the Republicans’ Senate majority, boosted the dollar index (DXY) up by 1.72% to 105.17, with a high of 105.44. This climb led to notable drops in the euro, Mexican peso, and Chinese yuan, reflecting market concerns over potential tariffs targeting these regions.
Market Impact of a Republican Sweep
A Republican majority could bring substantial policy changes. With expected moves on immigration, tariffs, and tax cuts, inflation is anticipated to rise, which could slow the Federal Reserve’s rate cuts and support the dollar’s strength. “This can push inflation higher and force the Fed to a slower easing path, which is dollar-positive,” commented Nikos Tzabouras, a senior specialist at Tradu. However, Trump’s past preference for a weaker dollar may affect its long-term outlook, as he has advocated for a lower dollar to support exports.
Cryptocurrency and the Dollar
Bitcoin reached a new high of $75,389 as Trump’s favorable stance on cryptocurrency buoyed the asset, bringing it up by 7.3% to $74,181. Analysts predict a potential increase in cryptocurrency investment if policies supporting the industry emerge under Trump’s administration.
Fed and Global Central Banks’ Policies
The Federal Reserve is likely to announce a 25-basis-point rate cut on Thursday, with investors eagerly awaiting clues on future rate moves. Meanwhile, the Bank of England, Sweden’s Riksbank, and Norway’s Norges Bank are all expected to make key decisions this week, with the Bank of England poised for a 25-basis-point cut.
