Impact Of Trump’s Election On Forex, Gold And Oil Markets
Professional traders on Dominion Options pay close attention to geopolitical changes that can impact market trends. A recent high-impact political event was the US presidential election. A race between the Democratic and Republican parties ended with a win for former president Donald Trump.
Trump previously won the 2016 election, which led to the famous Trump trade, where the dollar and equities markets rallied. In 2024, his reelection will significantly impact forex, gold, and oil markets. This article will examine the potential impacts and how traders can take advantage of likely trends in forex, gold, and oil.
Trump Election Win And His Policies
The US had the option to vote for Democratic candidate Kamala Harris or Republican candidate Trump. While Harris would have maintained most of Biden’s policies, Trump has proposed several changes that have changed the outlook for the US economy and its monetary policy.
Lower Taxes
Trump has proposed lowering taxes in the US to boost employment. According to him, the corporate tax should be reduced from 21% to 15%. If this happens, the impact on the economy will be significant. Business conditions will improve, allowing more companies to increase employees.
A robust economy will likely increase inflation and pause the Federal Reserve’s rate-cut cycle. Inflation in the US has just dropped from its peak when the Russia-Ukraine war sent oil prices skyrocketing.
The US central bank had to hike interest rates to lower price pressures. The most recent inflation reading revealed that prices increased by 2.6% in October, near the central bank’s 2% target. Therefore, Fed policymakers voted to start lowering borrowing costs in September.
However, if lower taxes lead to a rebound in economic demand, the outlook for Fed policy might change completely.
Aggressive Trade Policies
The new US president has also proposed a 10% or higher tariff on all goods imported into the US. Although this might benefit local businesses, it will also increase prices for the US consumer. Such an outcome would also mean higher inflation.
At the same time, experts believe import tariffs will destabilize the global economy. Most major economies, like China, the Eurozone, and Canada, rely heavily on exports to the US. Therefore, tariffs might hurt these economies. Notably, Trump has threatened to impose a 60% tariff on goods from China. Additionally, he has threatened high tariffs on cars imported from the Eurozone.
An End To Wars
Donald Trump has promised to end the ongoing wars in Ukraine and the Middle East. Experts believe he will continue supporting Israel in the Middle East. However, he has said they should hurry and end the war.
Meanwhile, others believe he might impose sanctions on Iran, which has attacked Israel on several occasions.
Immigration
Finally, the new president has promised mass deportation of illegal immigrants in the US. He plans to seal all gaps that allow people to enter the country illegally, especially through Mexico. Fewer immigrants will allow more US citizens to secure gainful employment.
Potential Impact On Forex
Trump's policies will significantly impact the forex markets. Notably, the US dollar will likely rally as the US economy grows faster than expected. At the same time, higher inflation in the US will pause Fed rate cuts, boosting Treasury yields and the greenback. Such an outcome for the dollar would mean weakness for its peers like the pound and the yen.
USD/JPY
The yen will be a major loser due to the wide rate gap between Japan and the US. So far, the Bank of Japan has only implemented one rate hike this year, and economists do not expect another one until next year. Therefore, there is nothing to support the yen against a rallying dollar. The outlook for Japan’s currency is bleak.
EUR/USD
Meanwhile, Trump’s tariffs will significantly hurt the euro and the Canadian dollar. The Eurozone economy will suffer due to tariffs on cars, while Canada’s economy exports over 75% of its products to the US.
USD/CAD
Potential Impact On Gold
On the other hand, gold prices will feel the pain of higher US Treasury yields due to a more hawkish outlook for Fed policy. The yellow metal performs poorly when interest rates are high. This year, gold has gained partly due to expectations of lower interest rates in the US. The Fed’s first rate cut in September was a big boost for gold.
Gold
However, the outlook has clouded, especially since Trump’s win. The Fed might have to leave interest rates at a restrictive level for longer, which is bearish for bullion.
Meanwhile, increased uncertainty about the global economy could give gold a safe-haven appeal. At the same time, it is considered a store of value when inflation is high.
Potential Impact On Oil
Oil
The oil market might suffer under Trump’s administration. First, a stronger dollar will make oil more expensive for foreign buyers, reducing demand. Second, ending the ongoing wars will remove the premium on oil, lowering prices.
For a long time, the Middle East war has boosted oil due to the risk of an escalation. The war between Israel and Iran threatened to disrupt the oil supply, which might tighten the market and increase prices. Therefore, an end to these wars would have the opposite effect.
Meanwhile, potential sanctions on Iran would reduce global supply, boosting prices.
Trading The Trump Trade
Traders can take advantage of Trump’s policy changes by trading currencies and commodities on Dominion Options. In the forex market, they can buy the dollar and sell currencies that will feel the impact, such as the euro, CAD, and the yen. Meanwhile, for gold and oil, traders can wait to see if these policy changes will outweigh other market factors before selling.
Conclusion
The recent political change in the US can potentially drive significant trends in the forex, gold, and oil markets. Trump’s policies will especially change the outlook for the US economy and the central bank’s policy. Successful traders can expect major moves in different markets and position themselves accordingly.
Join Dominion Options today and trade forex, gold, and oil. Take part in the Trump trade and anticipate moves in major currency pairs like USD/JPY.
