Donald Trump’s election as the 45th President of the United States in November 2016 was one of the most significant events in the history of the forex market. The world’s biggest financial market experienced a significant shift in the wake of Trump’s victory, with the dollar initially plunging before experiencing a resurgence in the months following the election. In this article, we will explore what happened in the forex market when Trump was elected as President.
The initial shock
The first thing that happened in the forex market when Trump was elected as President was a significant drop in the value of the dollar. This was due to the uncertainty and fear that surrounded his election campaign. Trump’s statements on trade policies and immigration were seen as potentially harmful to the US economy, leading investors to sell off their dollars in a panic.
The dollar index, which measures the value of the US dollar against other major currencies, fell by almost 4% in the hours following Trump’s win. This was the biggest one-day decline in the index since 2001, and it reflected the uncertainty and volatility that was present in the market.
The Mexican peso was hit particularly hard by Trump’s election, with the currency falling by more than 10% against the dollar. This was due to Trump’s rhetoric on trade and immigration, which threatened to damage the Mexican economy. Other currencies that were affected by Trump’s victory included the Japanese yen, the euro, and the British pound.
The resurgence of the dollar
Despite the initial shock and uncertainty, the dollar began to recover in the months following Trump’s election. This was due to several factors, including Trump’s promises to cut taxes and increase spending on infrastructure, which were seen as potentially beneficial to the US economy.
In addition, the Federal Reserve began to raise interest rates in response to the strengthening economy, which further boosted the value of the dollar. The dollar index rose by more than 6% in the six months following Trump’s election, reaching its highest level in over a decade.
The impact on emerging markets
One of the most significant effects of Trump’s election on the forex market was the impact on emerging markets. Countries such as Mexico, China, and Brazil were particularly vulnerable to Trump’s policies, which threatened to disrupt global trade and investment flows.
The Mexican peso, in particular, was hit hard by Trump’s election, falling by more than 15% in the days following his win. This was due to fears that Trump would follow through on his promise to build a wall along the US-Mexico border and renegotiate the North American Free Trade Agreement (NAFTA).
The Chinese yuan was also affected by Trump’s election, with the currency falling to its lowest level against the dollar in more than eight years. This was due to fears that Trump would label China a currency manipulator and impose tariffs on Chinese imports.
Conclusion
In conclusion, Trump’s election as President had a significant impact on the forex market. The initial shock and uncertainty led to a drop in the value of the dollar, particularly against emerging market currencies such as the Mexican peso and the Chinese yuan. However, the dollar began to recover in the months following Trump’s election, as investors responded to his promises to cut taxes and increase spending on infrastructure. The impact of Trump’s policies on the forex market is likely to continue to be a significant factor in the coming years, as his administration continues to pursue its economic agenda.
