What we know so far

As of 7:00a.m. UTC, most data providers, including ABC, CBS, NBC, and CNN, projected thatDonald Trump would become the next president of the United States. However,even as Trump’s victory looks almost guaranteed at this point, it is thebalance of power in the U.S. Congress that will determine how successfully andeffectively the next president will be able to govern.

So far,Republicans have won an extra seat in the Senate, but neither of the partieshas a clear advantage in the battle for the House of Representatives. Overall,the counting of votes is still at a relatively early stage, and it could behours or even days before a final outcome is known. The contest will come downto seven swing states, only three of which (North Carolina, Georgia, andPennsylvania) have been most likely won by Trump so far. Still, judging by thelatest market reaction, it appears reasonable to infer that global investorsare pricing in a decisive victory by Donald Trump.

What has been the impact so far

As of 7:00a.m. UTC, the global markets were positioned for Donald Trump’s victory. U.S.Treasury yields and U.S. stock benchmark indices rallied sharply, pushing theU.S. Dollar Index (DXY) higher. Given that, it is no wonder other major fiatcurrencies plunged, with EURUSD and GBPUSD down 1.82% and 1.32%, respectively,while bitcoin hit a new all-time high of $75,410, as per Coinbase.

'Such a dramatic shift in market sentiment isexplained by Trump’s official policies, or more precisely by the possibleeffect these policies are likely to have,' says Kar Yong Ang, a financialmarket analyst at Octa Broker. 'Generally,it all boils down to Trump's tax, immigration, and trade policies, which differgreatly from what Harris proposed. The market perceives them as inflationary,which is why we are seeing a bullish impact in the U.S. dollar.'

The UnitedStates controls the world's primary reserve currency, the U.S. dollar, so onlya few countries will not feel the effect of the latest U.S. presidential andcongressional elections. Major currencies are already experiencing the initialimpact. 'Major currencies are fallingpredominantly because the U.S. dollar is rising, but there is also a fear thatTrump's policy on tariffs may hit their domestic economies,' Kar said.

Indeed, theprimary reason for such a dramatic decline in EURUSD, for example, is thatinvestors fear that Trump's policies on immigration and taxes will spurinflation and force the Federal Reserve (Fed) to tighten its monetary policy.This may expand the interest rate differential between the two economies,favouring the greenback. In addition, Trump has repeatedly threatened to imposetariffs on certain European goods like autos and chemicals. According to someanalysts, Trump's proposed 10% universal tariff on all U.S. imports may erodeEurope's GDP by up to 1.5% or about €260bn.

A similarkind of impact may await the United Kingdom, where Trump's blanket tariffswould hit billions of pounds of U.K. automotive, pharmaceutical, and liquorexports. It stands to logic that GBPUSD was down more than 1.3% today.

For similarreasons, CNYUSD (Chinese renminbi / U.S. dollar spot rate) hit a 3-month high. 'For the Chinese economy, the risks areeven greater, as Trump promised toimpose higher tariffs on Chinese goods. On top of that, under hisadministration, tensions are likely to grow over the CNYUSD exchange rate,'comments Kar Yong Ang, a financial market analyst at Octa Broker. Although thecurrency policy of the future Trump Administration is unclear, in his interviewwith Bloomberg, he had this to say: ‘We have a big currency problem because thedepth of the currency now in terms of strong dollar / weak yen, weak yuan, ismassive.

Interestingly,the impact on the gold market has been relatively muted so far. As of 7:00 a.m.UTC, XAUUSD was down 1.2%, but historically, it is not a significant swing,especially given how much the U.S. dollar has strengthened. 'Because Trump's victory appears to bedecisive, it lowers the probability of social tensions in the U.S., which isnot a minor factor considering how fractious U.S. politics has become lately.Thus, XAUUSD is selling off, but I think there are bullish risks ahead asrelations between China and the U.S. turn bitter,' comments Kar Yong Ang.

Indeed,Donald Trump will likely heighten the Sino-U.S. trade tensions, which is apositive factor for gold in general. In addition, Trump's massive tax cuts willlikely expand the U.S. fiscal deficit and may turn some strategic investorsaway from the U.S. dollar and into gold and bitcoin. In fact, BTCUSD hit a newall-time high on the news of Trump's potential victory. He is seen as moreactively supportive of cryptocurrencies than Harris.

In theshort term, all the bullish dollar trades may temporarily reverse as tradersbuy the dips in EURUSD and GBPUSD in hope of a technical rebound. In the longterm, however, the bearish pressure on these pairs will likely persist.

About Octa

Octa is aninternational broker that has been providing online trading services worldwidesince 2011. It offers commission-free access to financial markets and a varietyof services used by clients from 180 countries who have opened more than 52million trading accounts. To help its clients reach their investment goals,Octa offers free educational webinars, articles, and analytical tools.

The company is involved in a comprehensivenetwork of charitable and humanitarian initiatives, including the improvementof educational infrastructure and short-notice relief projects supporting localcommunities.

Since its foundation, Octa has won more than70 awards, including the ‘Best Forex Broker 2023’ award from AllForexRating andthe ‘Best Mobile Trading Platform 2024’ award from Global Brand Magazine.