Listen to the article here:
Key Points:
The dollar index (USDX) shot up 1.7% on Wednesday, marking its largest single-day gain in four years, as Trump’s re-election stirred anticipation of pro-dollar economic policies.
Traders responded swiftly, pushing up the dollar and pricing in Trump’s expected tax cuts and tariffs that could drive inflation. This surge in USDX signals that the dollar is back in focus, reflecting strong expectations for growth and renewed “Trump trade” policies, which previously rallied markets.
Picture: The USDX chart shows recent bullish momentum with a rise to 105.325, but signs of consolidation near 105 suggest potential resistance ahead, as seen on the VT Markets app.
The dollar’s momentum weighed on other currencies, with the euro dropping 1.8% to $1.0730, a sharp fall not seen since Brexit.
See also: US Stock Futures, Dollar Rise as Early Results Favour Trump
Many traders worry that higher tariffs from Trump could slow global trade, especially impacting Europe. USD/JPY rose 2% to 154.59, putting the yen near intervention levels, while the Mexican peso tumbled over 3%, hitting a two-year low.
The dollar’s strength also rippled through the bond market. U.S. Treasury yields jumped, with the 10-year yield up 14 basis points to 4.4343%, marking its biggest gain in nearly seven months.
Traders expect that Trump’s policies will drive inflation, creating less room for the Fed to cut rates aggressively, further supporting USDX.
The 30-year yield saw an even larger rise, highlighting how strongly markets are reacting to potential fiscal changes.
Trump’s re-election is creating waves beyond the U.S., with emerging markets feeling the pressure of a stronger dollar.
In China, where trade tensions could re-escalate, the offshore yuan fell to 7.1969 per dollar, despite efforts by Chinese banks to support the currency. The euro and British pound also weakened, with USDX’s strength echoing across global markets.
As USDX gains momentum, the dollar looks set for further strength if inflationary pressures hold and the Fed remains cautious. However, the dollar’s rise could add volatility, particularly if Trump’s trade policies intensify global economic tensions.
The dollar index’s path forward now hinges on how these anticipated changes in fiscal policy play out on the global stage.
Start trading now — click here to create your live VT Markets account.
Education
Company
FAQ
Promotion
Risk Warning: Trading CFDs carries a high level of risk and may not be suitable for all investors. Leverage in CFD trading can magnify gains and losses, potentially exceeding your original capital. It’s crucial to fully understand and acknowledge the associated risks before trading CFDs. Consider your financial situation, investment goals, and risk tolerance before making trading decisions. Past performance is not indicative of future results. Refer to our legal documents for a comprehensive understanding of CFD trading risks.
The information on this website is general and doesn’t account for your individual goals, financial situation, or needs. VT Markets cannot be held liable for the relevance, accuracy, timeliness, or completeness of any website information.
Our services and information on this website are not provided to residents of certain countries, including the United States, Singapore, Russia, and jurisdictions listed on the FATF and global sanctions lists. They are not intended for distribution or use in any location where such distribution or use would contravene local law or regulation.
VT Markets is a brand name with multiple entities authorised and registered in various jurisdictions.
· VT Global Pty Ltd is authorised and regulated by the Australian Securities & Investments Commission (ASIC) under licence number 516246.
· VT Global is not an issuer or market maker of derivatives and is only allowed to provide services to wholesale clients.
· VT Markets (Pty) Ltd is an authorised Financial Service Provider (FSP) registered and regulated by the Financial Sector Conduct Authority (FSCA) of South Africa under license number 50865.
· VT Markets Limited is an investment dealer authorised and regulated by the Mauritius Financial Services Commission (FSC) under license number GB23202269.
· VTMarkets Ltd, registered in the Republic of Cyprus with registration number HE436466 and registered address at Archbishop Makarios III, 160, Floor 1, 3026, Limassol, Cyprus.
Copyright © 2024 VT Markets.