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The dollar saw its biggest surge in two years, and Wall Street was set for significant gains as investors speculated that Donald Trump would reclaim the White House, leading to a “high-octane” US economy characterized by increased growth and inflation.
The US dollar strengthened against major currencies like the euro, yen, and pound on Wednesday as traders returned to “Trump trades,” anticipating the former president’s policies of raising tariffs and cutting taxes to drive up inflation and limit interest rate cuts.
Wall Street was poised for strong gains at the opening bell, with S&P 500 futures up 2.1% and Nasdaq 100 futures up 1.7%.
Companies expected to benefit from a Trump victory, such as Tesla, saw significant increases in their stock prices. Tesla surged 13.3% in pre-market trading, fueled by optimism that Elon Musk, a prominent Trump supporter, would thrive under a Trump administration. Musk has endorsed the Republican candidate to avoid burdensome regulations.
While some states were still undecided, investors reacted positively to Trump’s victories in key battleground states like Pennsylvania, Georgia, and North Carolina.
“The Trump trade is back on,” said ING currency strategist Francesco Pesole. “It seems like the markets are pricing in a decisive outcome or something close to it,” he added, referring to a potential scenario where Republicans gain control of both houses of Congress, further boosting the strength of the US dollar.
The dollar index, which measures the currency against a basket of peers, rose by 1.4%, marking its largest single-day gain since November 2022. The pound fell by 1% against the dollar to $1.291, while the euro dropped by 1.6% to $1.076.
The yield on the 10-year Treasury climbed by 0.14 percentage points to 4.43%, reaching its highest level since early July. The 30-year Treasury bond also saw a significant move, hitting 4.62%.
Renewable energy stocks and European car manufacturers faced pressure due to the prospect of tariffs and deregulation in the US, while US banks experienced gains.
“The market is responding to a potential ‘red wave,’ but challenges may arise later,” said Russell Investments’ global head of investment strategy, Andrew Pease. “Investors could be underestimating the risks associated with additional tariffs and a resurgence of trade tensions, considering that the economic impact of the previous trade war under Trump was relatively contained.”
Pictet Asset Management’s chief strategist, Luca Paolini, cautioned about potential volatility if Trump pursued his tariff plans as president. “Markets may be willing to give Trump the benefit of the doubt, but they could regret it if President Trump’s actions mirror those of candidate Trump,” he warned.
Bitcoin surged over 7% to reach a record high of $75,389, positioning itself as a standout performer across markets. Coinbase, a popular cryptocurrency exchange, also saw a 14% increase in its stock price. Trump’s pro-cryptocurrency stance, with promises to make the US a “bitcoin superpower,” contributed to the positive sentiment.
Futures linked to the Russell 2000, which tracks US small-cap stocks, rose by around 5%, signaling expectations of a broader market rally.
Lombard Odier’s chief economist, Samy Chaar, anticipated that a Republican sweep could lead to a dynamic US economy driving global equities higher in the coming year, particularly benefiting financial and defense stocks.
In response to the potential tariffs under a Trump administration, the Mexican peso depreciated by 2.6% to 20.62 pesos against the dollar.
The yen also weakened by 1.5% to ¥153.9 against the US dollar, prompting a rally in Japan’s export-focused stock market, with the Topix index gaining 1.9%.
Chinese markets experienced declines, with Hong Kong’s Hang Seng index dropping 2.2%, led by mainland Chinese companies. The offshore and onshore renminbi weakened against the dollar, while currencies linked to China’s economy, like the Australian dollar, also depreciated.
“Trump’s tariff policies, if implemented, could have significant negative impacts,” said National Australia Bank’s global co-head of forex strategy, Ray Attrill. He emphasized the uncertainty surrounding the use of tariffs as a negotiating tactic or a concrete policy under a Trump administration.
sentence: The cat chased the mouse.
Rewritten: The mouse was chased by the cat.