Trump Boosts US Dollar Expects Prolonged Dollar Prevail
The reaction to the US election so far in the FX market has been, as expected, a strong dollar across the board.
“There is no major divergence in the performance of G10 currencies, with daily losses totaling around 1.0-1.7% except for the Canadian dollar, which is down less than 1%. This reflects the view that a landslide Republican victory is positive for the US economy and, by extension, Canadian exporters, as well as the fact that the CAD will be less exposed to tariffs in China and geopolitical developments under a new Trump presidency.”
“The sharp rise and broad sell-off across the Treasury yield curve reflects broad expectations for an inflationary mix of domestic (fiscal and migration) and external (tariff) policies from Trump. We also observe some action in short-term USD swap rates related to the aggressive repricing of Fed rate expectations.”
“In line with our expectations and consensus, the market still holds out hope for a 25bp FOMC rate cut to 4.75% tomorrow, but the OIS curve has already priced in about 10bp+ of price adjustments to the 2025 tenor. That entrenches the policy rate near 4.0% in June 2025, almost 100bp higher than the mid-September pricing.”
Source: FXStreet
