Euro Suffers Steep Drop After Trump Victory

The euro plunged to $1.0740, down 1.75%, marking its worst drop since March 2020. This decline came on the back of a surging U.S. dollar, driven by a Trump victory in the U.S. presidential race. 

Expectations of lower corporate taxes and renewed tariffs on imports drove the dollar index up 1.5% against major currencies. Meanwhile, Bitcoin surged 5% to a record high as European markets opened, reflecting investor appetite for alternatives amidst currency volatility.

Trump’s re-election, his second term after 2016-2020, signals a return to his pro-business policies, particularly reduced taxes for corporations and wealthy individuals and tougher trade barriers. Economists predict these measures will push consumer prices higher, potentially prompting the Federal Reserve to adopt more restrictive policies that would strengthen the dollar further. 

U.S. Treasury yields also rose, with the 10-year benchmark yield climbing 15 basis points to 4.42%, expanding the spread with Germany’s Bund to 200 basis points, the largest gap in six months.

The impact rippled across global currencies; the Japanese yen, Australian dollar, and British pound all slid by 1.5%, 1.4%, and 1.3%, respectively. Central-Eastern European currencies also suffered, with the Hungarian forint dropping 2.4% and the Polish zloty losing 1.9%. Commodities were not spared as WTI crude fell 1.5% to below $71 per barrel, with Brent following suit at $74.40, and gold slipped 0.7%.