Trump-Win Bets Influence Dollar and Bond Futures: Markets Overview

The dollar strengthened while Treasury futures declined as traders increased their bets on a Trump victory in the US presidential election following an assassination attempt. A Bloomberg index tracking the greenback’s strength against other currencies rose by 0.2%, the Mexican peso dipped, and Bitcoin surged to its highest level in over a week. These moves suggest a belief that Trump’s return to the White House could lead to tax cuts and higher tariffs.

Market Reactions and Predictions

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Futures indicate a rise in Treasury yields as European markets open, with Asian markets closed due to a holiday in Japan. Stocks in Asia fell, with Hong Kong’s Chinese stocks dropping further after data revealed weaker-than-expected momentum in China’s economy. S&P 500 futures pointed to a higher US opening.

“With markets pricing in a greater possibility of Trump 2.0, the US dollar will likely get some tailwinds while the Mexican peso and Chinese yuan could suffer,” said Charu Chanana, a market strategist at Saxo Capital Markets. “Trump trades could be back in focus.”

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Trump’s Economic Impact

Trump’s policies favoring looser fiscal measures and higher tariffs are expected to strengthen the dollar while weakening Treasuries. Yields spiked following Joe Biden’s weak debate performance last month, highlighting the sensitivity of Treasuries, especially long-term ones, to election outcomes.

Despite the current market trends, surprises are still possible with almost four months left in the US election campaign. South Korean defense and nuclear energy firms’ shares also rose, reflecting the global impact of US political developments. Bitcoin hit $61,000 on Monday, as Trump’s support for the crypto industry grows in his bid to attract voters.

Federal Reserve and Economic Reports

Last week’s significant developments in the Federal Reserve’s fight against inflation have led to increased expectations of two rate cuts in 2024, supported by recent economic reports. “If Trump emerges as an even more obvious winner, then we should see the bear-steepener we saw after the debate,” said Michael Purves at Tallbacken Capital. “In terms of equities, I don’t think this changes the trajectory at the overall level, though some stocks which will benefit from lower corporate taxes and lower regulation.”

China’s Economic Outlook

Traders are also watching the start of the Third Plenum, a meeting of China’s top leadership, which is expected to set long-term economic and political policies. The People’s Bank of China kept its one-year policy rate unchanged as expected. However, economic growth dropped to its slowest pace in five quarters, putting pressure on Beijing to boost economic confidence.

“I guess the weak release is a good set up for the Third Plenum to look into more constructive policies to support the economy,” said Vey-Sern Ling, managing director at Union Bancaire Privee.

Conclusion

The financial markets are experiencing significant shifts due to increasing bets on Trump’s election victory, impacting the dollar, Treasury futures, and Bitcoin. As the US election approaches and global economic conditions fluctuate, traders and investors will continue to navigate these complex dynamics.