The Results are finally in – Trump Presidency Trumps Dollar

Markets made it abundantly clear in the run up to the election, as they did with the Brexit vote, that they wished for continuation in the status quo, and to avoid a volatile result. Trump’s personality and his divisive policies are the definition of volatile, and the US Dollar is suffering.

At 4:30am this morning Trump had 244 of the electoral college votes of the 270 needed to be confirmed President of the United States, with enough safe Republican states left to carry him over the line.

Markets are now in turmoil, with the US and the Dollar understandably the worst affected. But Asian markets have tumbled, money is flowing into safe haven stocks, gold, and currencies such as the Yen and Swiss Franc which are up a full percent on the day’s trading.

The US stock-market is expected to lose more than 4% when their markets reopen at midday UK time, in an eerily similar vein to the Brexit when UK stocks and the Pound recorded massive gains the night before with an expected victory for Remain camp. Hillary even had the same lead in the polls, which have gotten it startlingly wrong once more.

What does this mean for GBP/USD moving forward?

If the Brexit vote is anything to go by, this will be hanging over the Dollar’s value for a few weeks as we wait to hear what Trump’s plans are. Will his rhetoric change and become more tempered now he has gained office?

It is important to remember that the House of Representatives has also been won by Republicans, so in effect, Trump has the same power Barack Obama enjoyed when he first assumed the Presidency in 2008 and enacted sweeping legislation.

However, it is also an important distinction that the US has a buffer period for administration change between November and January. This is normally to allow for a contested election to be resolved, but now markets have time to digest a Trump Presidency before it happens. Similar to the positive effects a delay in Article 50 had on the British Pound, this will temper market backlash and likely ensure the value of the Dollar does not spiral downwards.

What can we expect for the rest of this week?

I expect further US Dollar weakness in the immediate future. US and European markets are yet to open on the news. So USD sellers may be wise to take advantage of what are still incredible levels to sell Dollars before this news in the markets filters into GBP/USD exchange rates any further. You can contact your account manager to discuss the process of moving Dollars into Sterling and to assess what live buying rates can be sourced in this volatile marketplace.

For more information on how the result of the US Presidential election could affect exchange rates over the coming days and weeks please feel free to email me at jjp@currencies.co.uk.

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