In the wake of Donald Trump's victory in the U.S. presidential election, the dollar maintained its position near four-month peaks, buoyed by its largest single-day surge in two years. This rise was attributed to anticipations of Trump's proposed policies on tariffs and taxes driving investors towards U.S. assets. Despite expectations of a Federal Reserve rate cut by 25 basis points, the focus shifted to Trump's future appointees and the Republican party's control over Congress, which could facilitate the enactment of his fiscal agenda. Jane Foley, a currency strategist at Rabobank, noted, "If there is, then we will probably, in the market collectively, conclude he will get more of his fiscal agenda through. And that could be dollar-supportive."
Market reactions also reflected on the Federal Reserve's forthcoming decisions, especially in light of a below-expectation October jobs report influenced by recent hurricanes and labor strikes. Trump's policies on immigration and tariffs have led to speculation about a potential slowdown in the Fed's rate reduction pace due to inflationary pressures. Currently, the CME Group's Fed Watch Tool indicates a 67% likelihood of a Fed rate cut next month, a decrease from 77% before the election. The dollar index saw a minor decline of 0.3% at 104.84, following its significant gain the previous day.
Meanwhile, in Europe, the euro experienced a slight recovery despite political turmoil in Germany and ongoing economic challenges. The Bank of England and central banks in Sweden and Norway made decisions in line with expectations, impacting the sterling and the crowns respectively. In Asia, the yen weakened against the dollar, prompting Japan's top currency diplomat to signal potential government intervention against speculative trading. The yuan strengthened following impressive export figures from China, while cryptocurrency markets saw Bitcoin retract from record highs and Ether gain significantly.
Source: Reuters