• Donald Trump wins his second US presidential election
   
• Republicans take Senate; House control still in the air
   
• Market sentiment suggests a Trump presidency and Republican majority will boost the US economy, leading to a stronger US dollar in the medium term.

• 4Q 2024 rate cut trajectory unchanged

Republican nominee and former president Donald Trump has won the US presidential election after beating Democratic Vice President Kamala Harris.
For weeks leading up to Election Day, pollsters had predicted a neck-and-neck race between former Trump and Harris.

As for the rest of the elections, the Republicans had taken a majority in the Senate, the upper chamber of the US Congress, and were also on track to win the House of Representatives, raising the possibility of a Republican sweep in the 2024 elections. Such a scenario would present an easier path for Trump to enact major policy changes.

Although the outcome of every race has not yet been determined, the outlook for control of Congress and the White House has become considerably clearer.

First 100-days of Trump Administration outlook. Donald Trump's projected first 100 days in his second term are expected to focus on advancing his "America First" agenda, aiming to reverse policies implemented by the Biden administration. Key priorities include securing the US border, possibly with immediate closures and intensified deportations, and boosting domestic energy production by rolling back environmental policies. Trump's team also has plans to expedite oil and gas exploration, and he has mentioned ending Biden's climate initiatives to reduce energy costs.

On immigration, Trump may reinstate strict policies, including further limiting eligibility for work permits and pursuing deportations of undocumented individuals. Economic actions could include high tariffs on goods from China and other nations to protect US manufacturing, as well as tax cuts aimed at the middle class. His proposed initiatives on crime include targeting drug cartels as foreign terrorist organizations, a designation that could allow harsher actions against them domestically and internationally.

The America First Policy Institute (AFPI), a think tank of former Trump officials, has been developing these policies to ensure quick implementation, potentially bypassing bureaucratic obstacles faced during his first term. The AFPI has emphasized deregulation, energy independence, and limiting federal oversight, laying a groundwork for an administration ready to act swiftly on Trump’s policy promises if he returns to office in 2025.

Market sentiments seem to be of the opinion that a Trump Presidency and Republican majority will be good for the economy. There have been a few comments already from Trump, who has promised to lower taxes and pay down debt as well. This may prove to be a challenge but time will tell. Trump has also stated that he does not wish to start more wars but rather end them, something which could have an impact on safe haven currencies and of course gold prices moving forward.

Following Donald Trump’s clear victory over Kamala Harris in the US presidential election, accompanied by a full Republican “Red Sweep” in Congress, US futures, Treasury yields, and the Dollar all surged sharply higher. Markets are responding favorably to expansionary fiscal policies, tax cuts, and a pro-growth agenda under the new administration.

In currency markets, Dollar has jumped to a clear leadership position. Dollar rallied sharply after news broke that Republican candidate Donald Trump defeated Democrat Kamala Harris. Higher interest rate support, a strong domestic growth outlook, potential fall-out from higher tariffs on the economies of US trading partners and higher risk premia for now are a good reason for the USD to play ‘first among equals’ which reflects the dollar's unique position. DXY jumps from 103.42 to 105.42.

The USD/MYR has seen fluctuations as the Malaysian ringgit has been impacted by the US dollar’s strength amid persistent concerns about global financial stability and US Federal Reserve interest rate policies, which remain a key driver for USD strength. The USD/MYR pair breached 4.40 levels to close at 4.4035 as compared to

Meanwhile, US yields add between 11 bps and 22 bps in a distinct bear steeping move. The 10-year Treasury yield surged above 4.4%, reinforcing the sentiment around Trump’s impact on fiscal policy.

4Q 2024 Rate Cut Trajectory Unchanged

The Federal Reserve meeting on November 7 may be overshadowed by the election as markets have largely priced in a 25 bps cut. This meeting will also be too soon for any updates to the Feds projections due to changes in policy by a potential Trump Presidency. Until announcements around tariffs and tax cuts are made and the implications begin, the Fed are likely to maintain their current stance. However, market participants as always are already moving to price in such eventualities and this in theory could keep the USD on the offensive moving forward. Intriguing times ahead for the US Dollar and global markets as the year-end approaches.
 

Source: BIMB Securities Research - 7 Nov 2024