US dollar and bitcoin surge, but bond prices tumble, as investors pile into ‘Trump trades’ – business live | Business

The US dollar is on track for its biggest one-day rise since March 2020, having climbed by 1.5% against a basket of other currencies today.

Kyle Chapman, FX markets analyst at Ballinger Group, says:

“The dollar has rocketed across the board in its best day in four years, as markets position for an inflationary and tariff-heavy future for the US economy. With Georgia, North Carolina, and Pennsylvania having been picked up and the NYT projecting a >95% chance of a Trump victory, the market has moved to fully price in a win for the former president.

Chapman adds that the foreign exchange market for major currencies (“G10 FX” in City jargon) is “a bloodbath this morning”.

He explains:

The euro is the worst hit, with markets anticipating that the open, stagnant eurozone economy will face some of the biggest headwinds in staging a recovery. The ECB has become chiefly concerned about growth, and so the negative shock to its open economy should speed up the pace of rate cuts and set in stone a path to stimulative monetary conditions.

Meanwhile, the Canadian dollar has been spared much of the losses, presumably as markets expect a short-term US growth boost to spill over to its northern neighbour.

“If Trump genuinely follows through with his policy offering, this likely puts FX on a path of long-term depreciation throughout his presidency. It sets the stage for a higher neutral Fed funds rate, structurally hotter inflation, trade wars, tariff-based currency depreciation abroad, and lower global growth. In the worst-case scenario where he follows through on all his tax and trade policies, EUR/USD parity is a very probable prospect.”

The US stock market is on track for sharp gains when Wall Street opens, in under seven hours (2.30pm GMT, or 9.30am New York time).

The S&P 500 share index is on track to jump 2%, according to the futures market, with the Russell 2000 index of small companies expected to rally even more sharply, by perhaps 5%.

Bartosz Sawicki, market analyst at fintech Conotoxia, says:

The bullish trend on Wall Street is likely to remain in place through the end of the year. In 2016, Trump’s unexpected win spurred the S&P 500 to rise around 15 percent within four months. However, a similar rally should not be expected this time.

While S&P 500 futures are up over 1.6 percent, investors elsewhere appear cautious, bearing in mind that lifting import tariffs is central to Trump’s economic agenda.

Analysts at Japanese bank Nomura say “Trump 2.0 appears upon us”, and that’s “bad news for Europe”.

Nomura told clients:

Trump winning means tariffs which will adversely affect growth in Europe.

The European Commission is expected to retaliate like-for-like, which could mean higher inflation in the euro area – or, as manufacturing firms’ pricing power is so diminished, as we have been flagging for some time, firms could be forced to absorb these higher costs, which in turn may result in some firms shuttering and unemployment rising, thus weighing more heavily on growth.

Donald Trump is now declaring victory, having been declared the winner in Pennsylvania – putting him on the brink of crossing the 270-electoral vote threshold to become the next president.

Capital Economics have predicted that Trump could introduce his proposed immigration curbs and tariffs via executive action sometime in the second quarter of next year.

They told clients earlier this morning:

Given the slowdown in illegal immigration over the past few months, those curbs may have a slightly smaller impact on the economy than we previously believed but, at the same time, Trump has also been doubling-down on his tariff threats recently, particularly his threats aimed at Mexico.

It remains to be seen whether these tariffs (the 10% to 20% universal tariff and the 60% tariffs on China) can legally be implemented via executive action, whether Trump sees them as a negotiating tactic or a new semi-permanent revenue source, and whether any countries (Canada?) or particular goods (energy?) could be exempted.

As a working assumption, we are minded to reduce our GDP growth forecast between H2 2025 and H1 2026 by roughly 1% and add 1% to our inflation forecast over the same period. We will also probably raise our fed funds rate forecast by 50bp, meaning that the low next year will become 3.50% to 3.75%.

With the US dollar strengthening, commodity prices are falling.

The oil price has dropped by 1.4%, with Brent crude dipping to $74.47 per barrel.

Copper futures have dropped by 2%, Reuters reports.

The euro is having a torrid morning against the US dollar, sliding by 1.8%.

That knocks the euro down by two cents against the US dollar, sliding to $1.073 this morning from $1.093 last night.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:

The euro – which is one of the most vulnerable major currencies to Trump presidency due to the tariff threat – tanked to 1.0718 against the greenback. Mexican peso – which is another currency highly vulnerable to a Trump win – is down by 3%.

The Mexican peso has hit its lowest level in two years, on anticipation of a Trump victory.

The peso has tumbled by 3.5%, to 20.79 peso to the US dollar, the lowest level since August 2022.

It’s another casualty of the move into Trump trades, as the Republican has threatened to impose high tariffs on Mexican imports.

The pound has dropped towards its lowest level against the US dollar in two months.

Sterling has shed almost two cents against the dollar since the US election results started to come in, and has fallen to $1.2855, down from $1.3041 last night.

That’s only its lowest level in a week (since the pound dropped after the budget), but if it slips much further, it will be the lowest since mid-August.

Trump tariffs would halve UK growth and push up prices, says thinktank

Larry Elliott

A second Donald Trump presidency could be bad news for the UK economy, experts fear.

UK growth would be halved in the event Donald Trump wins the US presidential race and imposes the swingeing new tariffs he has threatened, a leading thinktank has warned.

The National Institute of Economic and Social Research (NIESR) said the protectionist measures planned by the Republican challenger for the White House would result in weaker activity, rising inflation and higher interest rates from the Bank of England.

Ahmet Kaya, a NIESR economist, said that, were Trump to go ahead with a 60% tariff on Chinese goods and a 10% tariff on goods from all other countries, the resulting trade war would lower UK growth by 0.7 percentage points and 0.5 percentage points in the first two years.

Kaya said:

“The UK is a small, open economy and would be one of the countries most affected.”

NIESR has estimated that over two years the UK inflation rate would be 3-4 points higher while interest rates would be 2-3 points higher.

More here:

US government bond yields (the interest rate on American debt) are also surging this morning.

With bond prices falling, the yield on 10-year Treasury bills has jumped by 12 basis points to 4.41%, the highest level since the start of July.

[Reminder: Bond yields rise when the price of the debt falls].

That suggests traders are anticipating that a Trump presidency would lead to higher inflation, and add to America’s already whopping fiscal deficit (leading to more Treasury bills being issued).

Bitcoin has surged to a record high today as investors react to signs that Donald Trump could be on track to win the US presidential election.

The world’s biggest cryptocurrency has gained more than 8% to hit $75,389, exceeding its previous peak in March.

Other crypro assets are also rallying, with ether up over 9%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, explains:

Elon Musk is a staunch supporter of President Trump and traders are assessing that a second Trump administration see a lighter touch in terms of regulation.

However, although a rally in tech may be on the way, trade tariffs could end up having negative consequences for the sector by potentially exacerbating trade tensions with China and disrupting international supply chains for key components.

Bitcoin has also rocketed to a record high as crypto fans expect a more supportive regulatory environment.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

A turbulent day in the financial markets lies before us, as traders drive up the value of the dollar – and push down bond prices – as the US election results come in.

As counting continues, the odds of Donald Trump beating Kamala Harris to the White House have tumbled.

The Republican challenger has already won two crucial swing states – Georgia and North Carolina – with the remainder yet to be called.

It now appears the vice-president now cannot win the election without winning the state of Pennsylvania, in which Trump holds a lead, with 90% of the vote counted.

Trump’s early gains have triggered a surge in the value of the US dollar. The greenback has jumped by around 1.5% against a basket of currencies, including strong gains against the pound and the euro.

A Trump victory leads to a stronger dollar, in many traders’ view, because some of his key policies are inflationary. Tax cuts are stimulatory, while new tariffs on US imports would push up consumer prices, and curbs on immigration would lead to fewer workers and thus higher wages.

That environment, the theory goes, leads to higher inflation and thus higher interest rates.

Matthew Ryan, head of market strategy at global financial services firm Ebury, explains:

“The US dollar is trading higher against almost every currency in the world overnight on the news of the big outperformance in the polls from Donald Trump. Not only are markets positioning themselves for a comfortable Trump victory in the electoral college, but the prospect of a Republican controlled Congress, which is key in determining the ability of the incoming president to force policy changes through the US government.

“We’re seeing particularly large sell-offs in emerging market currencies, as investors price in higher US tariffs, elevated geopolitical risks and greater global uncertainty under a Trump presidency.

Democrats had been clinging to hopes throuh the night that they were seeing a Red Mirage – due to rural areas counting votes faster than urban ones – rather than a Red Wave. But Trump does seem to be performing well.

Investors have also been watching the results of congressional elections, to see who ends up controlling Capitol Hill.

And there the Republicans have already made significant gains, retaking the Senate.

It may take some days before we know the outcome for the House of Representatives, though.

Control of both houses allows a president to push through sweeping spending or tax policy shifts, while a divided government makes that process much harder.

Stephen Innes, managing partner at SPI Asset Management, explains:

A Trump White House with a Republican-led Congress could bring a growth surge fueled by tax cuts, deregulation, and big spending—though we’d also likely see higher inflation, steeper interest rates, and a tilt towards trade protectionism. Equities and the dollar would likely rally at first, driven by optimism around corporate earnings.

If Harris takes the presidency but Congress remains split, expect more of the status quo. With fewer bold moves, we’d see minimal economic or market impact. Meanwhile, a Trump win with a divided Congress could introduce a shaky path forward: trade tensions ramp up without the offsetting benefits of fresh tax cuts, adding a layer of uncertainty for equity markets.

The agenda

• 7am GMT: German factory orders for September

• 9am GMT: Eurozone services PMI for October

• 9.30am GMT: UK construction PMI for October

• Noon GMT: The weekly US mortgage application data

• 2.30pm GMT: Treasury committee hearing with Rachel Reeves and top officials on the budget