Trump's Dominant Performance Propels Dollar to New Heights

The foreign exchange market is deeply influenced by the results of the U.S. presidential election, with the U.S. dollar showing particular strength. As Trump is only a few electoral votes away from returning to the White House, the U.S. Dollar Index has seen its largest one-day gain since March 2020, with significant fluctuations in major currencies against the dollar. The current Trump trade sentiment has propelled the dollar's rebound, with the dollar rising against various currencies while emerging market currencies are under clear pressure.

Trump's Dominance Strengthens Dollar

On Wednesday mid-night, according to the latest preliminary estimates from several U.S. media, the Republican presidential candidate and former President, Donald Trump, has secured at least 270 electoral votes. Trump announced his victory in the 2024 presidential election in the early morning of the 6th.

The dollar has been on the rise since the start of the U.S. presidential election, with traders expecting that Trump's potential policy tendencies could trigger inflation, further boosting the dollar. Given the possibility of the Republican Party dominating both the Senate and the House of Representatives, the market widely anticipates that Trump's fiscal policies may be more aggressive.

Deutsche Bank, a well-known institution, pointed out that a potential unified government under Trump would have greater fiscal policy freedom, which is also the biggest support for the appreciation of the dollar. This is one of the core logic behind the current rise of the dollar.

Latest Market Analysis: Dollar Soars, Major Currencies Under Pressure

As of 4:06 AM ET, the U.S. Dollar Index rose by 1.29% to 104.76, touching a four-month high of 105.19 at one point. Analysts generally believe that Trump's policies will increase inflation expectations, thereby supporting the rise of the dollar.

Specifically, the U.S. dollar rose by 3.36% against the Mexican peso, reaching 20.55, a level not seen in over two years. Given Trump's policies, Mexico, as one of the main affected countries, sees significant pressure on the peso. Investors are also assessing Mexico's economic recovery capabilities under such policies.

EUR/USD: The euro fell by 1.42% against the dollar, to 1.08, near the lowest level since July. As demand for the dollar rises, euro bulls seem unable to support.

GBP/USD: The British pound also suffered a significant drop, falling by roughly 1% to 1.29. Analysts believe that the bearish target for the pound maybe around 1.2800, and if Trump's policies are further intensified, it could bring more pressure. JPY/USD: The yen fell by 1.8% against the dollar, to 154.34, the highest since July 30th. This reflects the weakening of the yen's safe-haven attribution in the current situation, with the dollar becoming the preferred safe-haven currency.

Market Sentiment and Outlook

The market is currently betting that the dollar will continue to strengthen, but whether it will last depends on several uncertain factors. In addition to expectations of Trump's policies, investors are also assessing the impact of the distribution of control in the U.S. Congress on future economic policies. Deutsche Bank further pointed out that if the Republican Party fully controls both the Senate and the House of Representatives, the dollar will have greater room to rise, but it will also cause greater pressure on emerging markets and trade-related currencies.

For other asset classes, the spillover effects of a stronger dollar are worth paying attention to. Investors may withdraw from emerging market assets such as the Mexican peso, looking for arbitrage alternatives. The decline of the pound implies market concerns about the British economy against the backdrop of a strong dollar, which may subsequently drive a chain reaction in other European currencies.

Institutional Views Summary

At the institutional level, analysts from well-known institutions generally believe that Trump's victory will push up the dollar. James Kniveton from Convera pointed out that the current market is obviously preparing for a turbulent geopolitical situation, which will undoubtedly support the dollar, while major trade currencies and emerging market currencies such as the Mexican peso may face downward pressure.

At the same time, some analysts caution that the actual effects of Trump's policies after implementation are still to be observed, and the strength of the dollar may not be sustained for long, but it obviously has a supporting effect in the short term. Investors need to be alert to the potential risks brought by a sudden reversal of the dollar.

The foreign exchange market is undoubtedly strongly driven by the election results, with the dollar soaring under the Trump trade effect, and trade and emerging market currencies showing clear signs of pressure. In the coming days, as the election results become clearer and Trump's potential policy direction becomes clearer, the volatility of the dollar may further increase. In the short term, there is still plenty of room for the dollar to rise, but investors also need to be aware of risks to cope with potential reversals in the dollar's trend.