Shock Trump Election Victory Prompted Pound US Dollar Exchange Rate Surge

November 9, 2016 - Written by Frank Davies

STORY LINK Shock Trump Election Victory Prompted Pound US Dollar Exchange Rate Surge

US Election Upset Prompted US Dollar Slump as Market Uncertainty Surged

Global markets were rocked overnight as it became clear that Donald Trump had won the presidential race, a result that ran counter to market pricing and investor expectations.

However, while the US Dollar (USD) plunged sharply as the results of the election came in these losses were somewhat pared by the more conciliatory tone of Trump’s acceptance speech.

This gave rise to hopes that a Trump presidency might be rather less radical than the campaign trial had suggested, with more conservative Republican elements likely to keep him somewhat in check over the coming years.

As a result the initial gains of the Pound Sterling to US Dollar (GBP/USD) exchange rate soon began to fall back, with market anxiety calming throughout Wednesday’s European session.

Widening UK Trade Deficit Limited Pound Sterling Uptrend

Confidence in the Pound (GBP) was not particularly boosted as the September UK trade deficit was found to have widened unexpectedly from -11.1 billion to -12.6 billion.

This weaker showing undermined earlier assertions that the weakening of the Pound has been positive for the UK’s trade outlook, with a wider deficit not boding overly well for the health of the wider economy.


Coupled with the mixed nature of the recent production and manufacturing production figures this suggested that the domestic economy is not in as strong a state as investors had been hoping to see.

With Trump’s victory seeming to raise the odds of a hard Brexit, given the proliferation of more protectionist rhetoric, the appeal of Sterling is likely to be limited in the near term.

GBP/USD Exchange Rate Volatility Forecast to Continue Amid Election Fallout

The fallout of the US election is expected to remain the primary influence of the GBP/USD exchange rate over coming days.

Markets could take a less pessimistic view of the result if Trump continues to avoid the inflammatory rhetoric that characterised his campaign, as Derek Halpenny, European Head of GMR at MUFG, noted:

‘If there is a sense over the coming days of Trump toning down on certain policies in order to work better with a Republican Congress, the financial markets may quickly revert attention to the potential positive growth prospects a more modest fiscal stimulus program might bring. Certainly a greater emphasis on tax cuts rather than increased government spending could be viewed positively.’

However, as the reality of a Trump presidency continues to sink in investors may be inclined to return to a more bearish view of the US Dollar, particularly if the odds of a December Federal Reserve interest rate hike decline further.

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