Dollar Set for Largest One-Day Jump Since March 2020 Following Trump’s Victory Over Harris
The dollar surged on Wednesday, poised for its largest single-day gain since March 2020, after Republican Donald Trump reclaimed the U.S. presidency, defeating Democrat Vice President Kamala Harris. Key currencies including the euro, Chinese yuan, and Mexican peso declined sharply, reflecting concerns over potential new tariffs impacting these regions.
In a decisive election, Republicans also gained control of the U.S. Senate, while the House of Representatives remains narrowly held by Republicans. A consolidated Republican government could bring sweeping policy changes, likely driving substantial currency volatility.
Trump’s agenda, which includes stricter immigration policies, new tariffs, tax cuts, and deregulation, is anticipated to fuel economic growth and inflation. This could limit the Federal Reserve’s capacity for rate cuts, bolstering the dollar. "This could push inflation higher, leading the Fed to ease more cautiously, which supports the dollar," said Nikos Tzabouras, senior market specialist at trading platform Tradu.
The eurozone, Mexico, China, and Canada are seen as vulnerable to these tariffs, which may slow their economic growth and increase the interest rate gap with the U.S. “Markets were relatively prepared heading into the election, with currency volumes about 25% to 30% above average,” noted Nick Wood, Head of Execution at MillTechFX and Millennium Global. This setup allowed investors to adjust positions without a rush.
Despite Trump’s longstanding preference for a weaker dollar to aid exports, his policies may still strengthen the greenback in the short term. Tzabouras highlighted, “Trump has frequently pushed for a weaker currency to support U.S. exports, but these policies may create headwinds for the dollar over time.”
In currency markets, the dollar index (DXY) rose 1.72% to 105.17, peaking at 105.44, its highest since early July. The euro (EURUSD) dropped 1.91% to $1.0720, hitting a low not seen since late June, while the dollar also gained 1.60% against the yen (USDJPY), reaching levels that could provoke intervention by Japan’s central bank.
Meanwhile, Trump’s favorable stance on cryptocurrencies helped push bitcoin to a record high of $75,389, with BTCUSD up 7.3% at $74,181.
As the Federal Reserve concludes its two-day meeting, investors expect a 25-basis-point rate cut and will look for cues on potential pauses in December. A strong September jobs report tempered expectations of further rate cuts, but recent weak October data, impacted by hurricanes and strikes, has renewed uncertainties.
Elsewhere, the Bank of England is anticipated to lower rates by 25 basis points on Thursday, with Sweden’s Riksbank likely easing by 50 basis points, while Norway’s Norges Bank is expected to hold steady.
