Dollar and Bitcoin Spike on US Election Expectations

Dollar and Bitcoin Spike on US Election Expectations

The dollar surged 1.5% to 154.33 yen, its highest level since July...

The 2024 US presidential election sparks market volatility, influencing the US dollar, stocks, and cryptocurrencies.

The dollar soared and Bitcoin reached an all-time high on Wednesday, November 6 as investors anticipated a win for Donald Trump at United States (US) polls.

Market Reaction

The US presidential election sparked significant market movement as Donald Trump gained ground in key states. Trump's victories in Georgia and North Carolina, combined with the Republican Senate control, fueled expectations of tax cuts, tariffs, and deregulation, ultimately boosting the American dollar.

Dollar Surge

The dollar surged 1.5% to 154.33 yen, its highest level since July. Additionally, it gained over 1% against the euro and more than 3% against the Mexican peso. This upward trend reflects investor optimism regarding Trump's pro-growth policies.

“Trump Trade” Impact

The “Trump trade” phenomenon has driven investor interest in assets expected to benefit from Trump's policies. US stock futures soared, with the Dow Jones futures up around 1,134 points and the S&P 500 futures up 129 points. Bitcoin also reached an all-time high, surpassing $74,000, as cryptocurrencies are considered part of the “Trump trade.”

Bitcoin's value skyrocketed by nearly $6,000, reaching an unprecedented high of $75,330.88, surpassing its previous record of $73,797.98 set in March. This surge was largely fueled by Donald Trump's promising stance on cryptocurrency, vowing to transform the United States into the “global capital of Bitcoin and cryptocurrency.”

Trump's plans also include appointing tech mogul Elon Musk to oversee a comprehensive audit of government spending. According to Russ Mould, an analyst from AJ Bell, Bitcoin's price has closely mirrored Trump's standing in the polls and betting markets.

This correlation suggests investor optimism regarding Trump's pro-growth policies, which contributed to the dollar surging 1.5% to 154.33 yen, its highest level since July.

Investors believe a Republican victory, particularly Donald Trump's win, would boost demand for digital currencies like Bitcoin. This optimism stems from Trump's pro-cryptocurrency stance and promise to turn the US into the “global capital of Bitcoin and cryptocurrency.” Additionally, analysts expect a Trump win to strengthen the dollar and raise Treasury yields due to his proposed tax cuts and tariffs on imports.

“Republican control of the Senate and the House could bring sweeping spending or tax policy shifts.

“However, congressional gridlock could suppress volatility,” Stephen Innes of SPI Asset Management said.

Economist and Esho Capital founder Peter Esho observed, “The markets are scrambling to figure out what happens next, but for the time being, the market is pricing in a higher growth and higher inflation outlook.” This shift towards higher growth and inflation expectations may pose challenges for Federal Reserve Chair Jerome Powell, who is striving to manage inflation.

Trump's proposals, viewed as potentially inflationary, contribute to these challenges. The market's reaction to the election outcome will likely influence the Federal Reserve's policy decision, scheduled for November 7. Speculation suggests the central bank may lower interest rates by 25 basis points, following a 50-point cut in September.

The dollar's surge against the yen, reaching 154.00, boosted Tokyo stocks by over 3%, driven by exporter gains. This upward trend reflected investor optimism regarding Donald Trump's pro-growth policies. Markets in Shanghai, Sydney, Singapore, Taipei, Mumbai, and Bangkok also saw gains, while Seoul, Wellington, Manila, and Jakarta recorded losses.

Hong Kong's market plummeted nearly 2% amid concerns about Trump's potential impact on China's economy and US-China relations. The dollar's broad recovery and stock market rally were influenced by the US presidential election outcome.

Wall Street's major indices rose over 1%, guiding traders worldwide ¹. The Federal Reserve's upcoming policy decision, expected on November 7, may involve a 25-basis-point rate cut, following a 50-point cut in September.