EUR/USD Dives as Trump Claims US Presidential Victory

The EUR/USD pair tumbled on Wednesday, hitting a four-month low near 1.0700 before edging up to 1.0750 during the European session. The euro was battered as Donald Trump, the Republican candidate, appears poised to take control of the Senate, with the GOP gaining significant leads in key battleground states, according to The Associated Press. Trump is reportedly close to securing the necessary 270 electoral votes to form a government.

In a statement reported by Sky News, Trump has declared victory over Democratic contender Kamala Harris.

Trump’s anticipated win has strengthened the US Dollar (USD), with the US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, surging to approximately 105.30. Market reactions reflect the belief that a Trump victory will support the USD, driven by his commitments to increase tariffs on imports and cut corporate taxes—measures expected to stimulate business activity, raise labor demand, and heighten inflationary pressures.

Conversely, this outcome is likely to challenge the economies of key US trading partners, including the Eurozone, the United Kingdom, China, and Canada. Trump’s protectionist stance could weigh heavily on their export sectors, raising the risk of economic slowdowns.

Looking ahead, investor attention will shift to the Federal Reserve’s monetary policy announcement on Thursday. The CME FedWatch tool indicates that traders are pricing in a 25-basis point (bps) rate cut, which would bring the federal funds rate to a 4.50%-4.75% range. This would mark the Fed’s second consecutive rate cut, albeit smaller than the 50 bps cut enacted in September.