Euro suffers worst drop since COVID as Trump set to win US election
Published on 06/11/2024
As a decisive win by Donald Trump looks likely in the US presidential election there has been a sharp rally in the US dollar, sending the euro to a four-month low and boosting Bitcoin by 5% to a record high as European markets opened.
The Republican Party has regained control of the Senate and leads in the House of Representatives, solidifying a "red sweep" scenario that grants Trump significant leeway to pursue his policy agenda.
With this victory, likely marking his second term following his 2016-2020 presidency, Trump is expected to maintain low taxes on corporations and wealthy individuals and to increase tariffs on foreign imports.
"We are going to fix our borders," Trump said in his first speech after the results, adding that "America has given a powerful, unprecedented mandate".
Economists largely agree that Trump's trade tariffs, coupled with tax cuts and a hardline stance on immigration, are likely to push consumer prices higher. This could prompt the Federal Reserve to adopt a more restrictive monetary policy, further supporting the dollar.
Dollar strengthens across the board, euro suffers worst day since COVID-19 outbreak
The euro fell 1.75% to $1.0740 as of 8 am CET, setting it on track for its worst day since March 2020.
A dollar index tracking the greenback’s strength against a basket of major currencies rose 1.5%.
Other currencies, including the Japanese yen, Australian dollar, and sterling, also weakened, with the yen dropping 1.5%, the Aussie 1.4%, and the pound 1.3%.
Central-Eastern European currencies saw the Hungarian forint drop 2.4%, the Czech koruna 2%, and the Polish zloty 1.9.
Meanwhile, the Chinese yuan and Mexican peso fell 1.2% and over 3%, respectively, weighed down by expectations of stricter trade and border policies.
"The reaction in FX markets has been a strong dollar across the board. We expect a prolonged period of dollar outperformance," wrote Francesco Pesole, a forex analyst at ING Group.