Trump wins

CAD

Surprisingly to us, the loonie is amongst the best performing G10 currencies overnight. While USDCAD is up, the pair has only risen by 0.75%, a smaller move than seen across other major currency pairs. To us, this fails to recognise the risk that Trump tariffs pose to the Canadian economy. Indeed, looking at America’s southern neighbour, where the tariff impact is likely to be similar, MXN is down more than 3%. We think the truth is likely to be somewhere in the middle, suggesting downside risks for CAD on the horizon.

USD

Results in the past hour or so appear to have been enough to see Donald Trump secure the 270 Electoral College votes needed to win the presidency. This has seen the DXY dollar index rally 1.7% overnight, in line with our expectations for a Trump victory. How much further this has to run, now hangs on who ultimately controls Congress. The Republicans have already flipped enough seats to guarantee a majority in the Senate. But House control continues to hang in the balance. For now, we think this should put a soft cap on further dollar upside, albeit risks are skewed towards a renewed greenback rally in the event that a Republican sweep materialises.

EUR

EURUSD slumped overnight on the news that Trump is set to be the next US president. As of writing the pair is down 2%, with risks looking skewed toward further weakness as more results are unveiled. With this likely to be the dominant story of the day – and little other news flow of note, we suspect the euro is likely to stay trading under pressure as markets adjust to the new state of affairs.

GBP

As expected, sterling outperformed overnight. Even with GBPUSD giving up 1.5% as the results trickled in, GBPEUR rose 0.5%. In our view, this reflects the UK’s relatively more insulated position on trade when compared to the eurozone, cushioning the blow to the pound from any potential tariff risks. We see little reason for this not to continue either. With markets still to price in the full impact of expansionary fiscal spending from last week’s budget, sterling should make headway on crosses, even as it gives up ground to the greenback.

Disclaimer

This information has been prepared by Monex Europe Holdings Limited, part of Monex S.A.P.I. de C.V. (“Monex”). The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. All entities in the “Monex” group of companies are regulated for different products and services within the jurisdictions in which they operate. Details of the different entities can be found here. Details of the respective entities’ regulated status and available products and services can then be found on the relevant links to the individual jurisdictions’ website.