Dollar and crypto surge following Trump’s presidential win

The US dollar has surged in global markets following projections of Donald Trump’s victory in the US presidential election, which will see him return to the White House. Investors appear optimistic about Trump’s economic plans, including proposed tax cuts and increased tariffs, as they anticipate higher inflation and a slowdown in interest rate cuts.

With longer-term higher interest rates, the dollar’s attractiveness for savings and investments has grown, contributing to a broader market shift.

The cryptocurrency market, too, saw a notable impact, as Bitcoin reached a record high. This surge aligns with Trump’s campaign promise to position the United States as a leading hub for Bitcoin and cryptocurrency activity.

Global market responses have been significant:

• The FTSE 100 index rose by 1% on Wednesday afternoon.
• The pound dropped 1.41% against the dollar, hitting its lowest level since August.
• The euro weakened 2.24% against the dollar, a low not seen since June.
• The dollar gained approximately 1.4% across various major currencies, including the Japanese yen.
• Japan’s Nikkei 225 closed up 2.6%, while Australia’s ASX 200 rose by 0.8%.
• Mainland China’s Shanghai Composite Index dipped 0.1%, while Hong Kong’s Hang Seng fell 2.23%.

Bitcoin reaches new heights
Bitcoin surged by $6,000 (£4,645), reaching an all-time high of $75,371.69. Trump’s supportive stance towards cryptocurrencies contrasts with the Biden administration’s stricter regulatory approach. Trump’s campaign included potential changes in leadership at the Securities and Exchange Commission (SEC), hinting at the removal of Gary Gensler, who has aggressively pursued crypto regulation.

Elon Musk, a cryptocurrency advocate and Trump supporter, could also play a role in a government audit on waste, according to Trump’s proposals. Tesla’s Frankfurt-listed shares saw a surge of over 14% in response.

Broader market reactions
The financial sector is bracing for potential economic upheaval due to Trump’s trade and fiscal policies. US bond yields have risen, reflecting expectations of inflation and potential economic changes. Trump’s proposed tariff increases, particularly targeting China, have raised concerns about economic implications for global markets, including the UK.

Economists warn that such measures could disrupt trade dynamics. Moody’s Analytics’ Katrina Ell pointed to potential economic strains in Asia due to Trump’s protectionist policies.

Questions have also emerged regarding Trump’s foreign policy approach, including commitments to defend Taiwan, a key player in the global tech supply chain.

Meanwhile, investors are keeping an eye on the US Federal Reserve’s impending interest rate decision, with Fed Chair Jerome Powell’s commentary expected to carry significant global market implications.