Polling data failed to predict that Trump would win the White House – which he did by 290 electoral votes to 228. Besides wrestling the presidency away from the Democrats, the Republican Party also managed to keep control of its majority in the Senate and Congress.
It was this data that guided markets to think that there was only a remote chance of Donald Trump defeating Hillary Clinton in the U.S. presidential elections. When Trump won the U.S. presidential elections – it wasn’t just the world who was shocked, the currency markets were also greatly surprised.
This shock to the markets caused the U.S. dollar to jump against other currencies. The U.S. Dollar index, which measures the value of the dollar against six currencies, rose by over 1% in the days following the election result.
The dollar surged against the pound, up from 0.7988 before the vote, to 0.83 by mid-January, a +3.9% rise. This reflected the fact that US businesses and investors thought that Mr. Trump would “Make America Great Again!”, cutting taxes, boosting spending, and accelerating America’s GDP growth.
Trump’s election victory also caused tremors on Mexican and Brazilian markets, with the countries’ respective currencies taking a battering. The Mexican peso in particular felt the news with the currency plummeting 12% against the dollar in the immediate aftermath of the election result.
The president himself weighed in on the dollar, telling the Wall Street Journal, “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me.”
However, Trump’s concern was soon eased. After rising quickly following the election, the dollar then saw several months of weakness and erased those gains as the great expectations for the US economy after Trump’s election faltered.
Fast forward to present time, the U.S. dollar outlook continues to darken as a potential trade war looms.
It is said that the U.S. dollar could face headwinds if President Donald Trump’s proposals to impose stiff tariffs on steel and aluminum imports are enacted, with the biggest risk stemming from the possible flight of capital flows needed to finance ballooning U.S. deficits.
The introduction of import tariffs threatens to increase the price of foreign products in the United States, reducing demand and imports.
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