US Dollar and US stocks soar as Donald Trump wins Presidency

Global stock markets surged on Wednesday, with Bitcoin reaching a record high and the U.S. dollar poised for its largest single-day gain in four years, following Donald Trump's election as U.S. president.

U.S. small-cap stocks, in particular, gained momentum amid expectations that a Trump presidency would bring tax cuts and support for domestic companies.

Bond investors sold off long-term Treasuries, anticipating that proposed tariff hikes would drive up the deficit and inflation. This could lead the Federal Reserve to be more cautious with rate cuts than it might have been otherwise, potentially heightening concerns about the U.S. fiscal position.

At 78, Trump reclaimed the White House in Tuesday’s election after a campaign that intensified polarization across the country.

Futures for the U.S. S&P and Nasdaq surged over 2%, while those for the small-cap Russell 2000 skyrocketed by 6%. The dollar index climbed 1.4%, on track for its strongest day since March 2023.

The surge in U.S. stock futures and indications of a clear election outcome lifted equity markets, with European shares rising 0.9% (.STOXX), as stock investors temporarily set aside concerns about the potential impact of higher tariffs.

The situation was different in emerging markets, as Mexico's peso plunged to its lowest level in over two years.

Among traditional currencies, the euro weakened due to potential tariffs and the growing gap between U.S. and European interest rates, falling 2% to $1.070. This marked its largest single-day drop since the 2016 Brexit referendum, surpassing a 1.4% decline in the British pound.

Meanwhile, the dollar surged 1.8% to 154.38 Japanese yen and rose 1.5% against the offshore yuan to 7.205, as reports indicated that Chinese banks were selling dollars to slow the yuan's decline.

China is viewed as being on the front line of tariff risks, with its currency especially vulnerable, trading on edge as implied volatility against the dollar hovers near record highs.

Mexico's peso briefly fell to 20.8038 per dollar, its lowest level since August 2022, marking a decline of more than 3% from its previous close—its biggest drop since the summer elections stirred turmoil in domestic assets.

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