Markets react to Trump win: US futures, dollar surge, commodities drop

So, it has just been confirmed that Donald Trump has won majority of the votes to become the next President of the USA and the Republicans have also won the senate.

The big win has given “an unprecedented and powerful mandate” declared Trump, as his party won swing states of North Carolina, Wisconsin, Pennsylvania and Georgia. The Republicans could also win the house, but this is not confirmed yet. With 5 results to go, Trump has already won 51% of the vote with Harris only securing around 47.4% - a massive victory for Trump and a massive response from the markets!

Source: TradingView.com

US futures point to a new record on S&P 500

US index futures have rallied strongly with the S&P futures showing a 2.3% gain. The rationale behind the US stock market rally is that Trump is seen as business-friendly and will be able to pass on his tax cuts through easily without much resistance from the democrats who have lost control of the senate. The key risk now is if the weakness in commodities and foreign markets could derail the rally in the short-term. It is also worth keeping an eye on rising bond yields, which could negatively impact sentiment, especially in growth stocks.

Could European indices come under pressure?

European stocks are higher too even though Trump’s tariffs could negatively impact European exports to the US. The threat of tariffs, the potential for a relatively tighter US monetary policy, as well as slumping commodities, are factors that might come back to hurt the European indices, once the dust settles.

Dollar surges on inflation concerns

The dollar is higher across the board while commodities have taken a hit amid the dollar strength and threats of tariffs hitting demand. With the Republicans having also taken a majority in the Senate, Trump has been given a powerful mandate and platform to implement his policies, including tax cuts. This could boost inflationary pressures and result in a slower pace of rate cuts from the Fed relative to other central banks. It could even prevent the Fed from cutting rates significantly in 2025 should the disinflation process stops and reverses. This is why the US dollar has rallied as we had expected.

Commodities drop

Crude oil is coming under pressure because of potential for increased drilling activity could lead to more US oil production. The downside has been limited so far because of the risk rally. But oil is more likely to test recent lows I would say, and the trigger would be if WTI breaks Monday’s low. As well as increased drilling in the U.S., and a stronger U.S. dollar, tariffs could hurt demand in key markets such as China.

Commodities could remain under pressure given Trump’s promise of tariffs on imported goods, especially from China. Industrial metals could be a particular weak spot and we have seen copper and iron ore being hurt overnight. The stronger USD and yields are also hurting gold as the opportunity cost of holding the non-interest-bearing asset climb.

There is now the risk that the FOMC may slow its rate-cutting pace. This is because inflation may re-ignite with Trump’s policies.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.