Trump Re-Elected After Historic US Presidential Contest
Donald Trump has secured victory in the US presidential election, following one of the most polarized campaigns in American history. This conclusion caps a turbulent race marked by two assassination attempts on Trump, a criminal conviction, and a late change in his Democratic opponent.
The president-elect made significant gains against the Democrats in 48 out of 50 states, decisively taking the “blue wall” of Midwestern states and clinching the necessary 270 electoral votes with a win in Wisconsin. Republicans also regained control of the Senate, and with their House majority intact, they are poised for unified power in Washington. This consolidation could pave the way for Trump’s agenda, which includes a combination of tariffs and tax cuts, likely impacting inflation and placing upward pressure on US interest rates.
Sterling Eyes Support as BoE Weighs Rate Cuts Amid Fiscal Expansion
Traders are increasingly betting on the Bank of England (BoE) to adopt a more accommodative stance, starting with a potential 25-basis point rate cut today. While the pound has struggled against the dollar’s strength, it has held up better than currencies like the euro, yen, and Swiss franc. However, with the UK government’s recent spending and borrowing increases, questions linger over how aggressively the BoE will proceed with rate cuts. The central bank may signal less flexibility in reducing rates post-budget, which could offer some support to sterling. Currently, short-term UK yields are at five-month highs, limiting the pound’s recent losses.
If the BoE’s updated economic forecasts—particularly on inflation—turn out to be more hawkish than expected, sterling could gain additional support as traders reassess the pace of the BoE’s easing. This shift could help offset some losses against the dollar and potentially push GBP/EUR to new two-year highs.
Euro Drops Sharply Amid US Election Fallout and German Political Turmoil
Following the US election results, the euro plunged over 2% on Thursday, hitting $1.0703—the steepest decline since October 2016. After Trump's 2016 election, EUR/USD experienced a further 4% drop through November and December. If a similar pattern emerges, the pair may fall below $1.03 by year-end.
In a further shake-up to the global economic landscape, Germany has faced its own political disruption: Chancellor Scholz has dismissed his finance minister and dissolved the coalition. A vote of confidence is scheduled for January 15 in the German parliament, and with instability rising, it’s likely the federal president may call for snap elections before March.
