EURUSD has taken a significant knock as Trump’s win in the US presidential election approaches.
EURUSD has somewhat recovered to 1.0750 after plummeting to near 1.0700 in Wednesday’s European session, its lowest level in more than four months. The major currency pair suffers as Republican nominee Donald Trump appears to capture the Senate from Democrats, with the Grand Old Party (GOP) amassing an unrivaled lead in crucial battleground states, according to The Associated Press. The agency shows Trump is centimeters away from capturing 270 The party must pass a certain number of seats in order to form a government.
Meanwhile, Trump has declared victory over Democratic challenger Kamala Harris, according to Sky News.
With Trump’s apparent triumph in sight, the US Dollar (USD) remains on top. The US Dollar Index (DXY), which measures the value of the dollar against six major currencies, has risen to around 105.30. Market behavior plainly reveals that Trump’s victory is beneficial to the US Dollar, as expected given the Republican candidate’s promise to raise import tariffs and reduce corporate taxes. A situation that will increase total economic activity and labor demand while raising inflationary pressures.
However, the plot is adverse for currencies of economies such as the Eurozone, the United Kingdom (UK), China, and Canada are key trading partners with the United States (US). Trump’s protectionist policies will have a direct impact on the export sectors of the aforementioned economies, increasing the danger of an economic slowdown.
The Fed anticipated to decrease interest rates again on Thursday, but by only 25 basis points.
EURUSD Investors will pay close attention to the Federal Reserve’s (Fed) monetary policy decision, which will be announce on Thursday. According to the CME FedWatch tool, traders have priced in a 25-basis-point (bps) interest rate drop, bringing rates down to 4.50%–4.75%. This would be the Fed’s second interest rate drop in a row. However, the rate drop will be less than the 50 basis points announced at the September meeting.
Investors will also look to Fed Chair Jerome Powell’s news conference to glean clues about the impact of Trump’s Victory over the interest rate path and inflation outlook.
Daily market movers: EURUSD gets hit by the buoyant US dollar and the weak Euro.
EURUSD under heavy selling pressure due to the US Dollar’s outperformance and the Euro’s (EUR) rapid decline against other major currencies. The Euro’s outlook has fallen as market investors expect Trump’s protectionist plans to have a considerable negative impact on European economic growth.
EURUSD underperformed across the board as fears about Eurozone economic growth have increased.
According to the Dutch bank, Trump’s tariffs would reduce European growth by about 1.5 percentage points, resulting in a potential €260 billion economic loss based on Europe’s expected 2024 GDP of €17.4 trillion.
Should Europe’s GDP suffer under Trump’s tariffs, the European Central Bank (ECB) may be forced to respond quickly, cutting rates to near zero By 2025, according to Euronews.
Trump’s triumph is likely to push the ECB to drop its Deposit Facility Rate by a larger-than-usual 50 basis points at its next monetary policy meeting in December. This would be the ECB’s fourth interest rate drop this year.
