Republican Donald Trump is to be the next President of the United States of America which is tipped to aid the US Dollar over the longer-term and we have started to see the currency pare its initial losses against the Euro and Pound Sterling.

Pound to Euro exchange rate today: 1.1197, down 0.19%, day's best rate: 1.1250Pound to Dollar exchange rate today: 1.2430, up 0.41%, day's best rate: 1.2548Pound to Australian Dollar exchange rate: 1.6208, up 1.62%, day's best rate: 1.6554Pound to New Zealand Dollar exchange rate: 1.7016, up 1.52%, day's best rate: 1.7245Pound to Rand exchange rate: 16.78, up 2.81%, day's best rate: 17.31

Donald Trump is heading to the Whitehouse.

At the time of writing the Republican candidate has secured the required 270 electoral college votes to take the keys to the Oval Office.

Reports have filtered through that Clinton has in fact called Trump to concede defeat.

What's more, the Republicans appear to have won enough seats to control the House and Senate which should allow a President Trump to pass policy unhindered.

We reported ahead of polls closing the view that a Trump victory would likely benefit the Pound against the Dollar but could see the currency fall against the Euro.

Analysis from Alan Ruskin at Deutsche Banksuggested that the Pound could gain by about 2% against the US Dollar on the event of such an outcome.

While GBP/USD was a lot higher when it became clear an upset was on the cards it has since fallen back.

"GBPUSD rallied overnight - in response to Trump’s victory – but failed to clear the 1.2557 highs of last week. The market has already sold-off with 1.2330 region still pivot support ahead of the range lows in the 1.2115-1.2080 region. Our bias is for a medium-term choppy range to develop further, while weekly momentum studies unwind," says Robin Wilkin at Lloyds Bank.

With regards to the EUR/GBP, Wilkin also notes fading Euro strength has opened the door to a dollar recovery:

"We are already back towards the mid-point of this range and expect the range to continue for now. Momentum studies are flat and only a break of the 0.8850 region would turn them back lower and open the potential for an extension towards lower support in the 0.8750 region."

The rapid recovery from the initial shock of the vote will have caught some by surprise, particularly if they choose to benchmark the event against Brexit.

Aurelija Augulyte at Nordea Markets believes the pullback we have seen from the initial move proves markets have learned from Brexit and enacted a faster reversal.

However, follow-through gains could still be possible as the momentum triggered by the vote has not completely faded.

“A Trump victory would in the initial instance, probably lead to a reversal of Monday’s FX moves, but likely multiplied by a factor of at least two times for G4 currencies, and at least three times for EM and higher beta currencies,” says Ruskin.

On Monday we saw a large jump in the US Dollar and fall in the Pound and Euro as a Clinton victory was baked into the market.

Trump Good for the Dollar Long-Term

The initial knee-jerk reaction to sell the USD was expected but now comes the hard part - deciphering impending currency moves.

Greg Anderson, Global Head of FX Strategy at BMO Capital believes the Dollar should benefit from a Trump presidency owing to his stances on tax, and his ability to appoint the next US Fed Governor:

"Trump’s proposed re-write of the US tax code could bring a big shift in USD fundamentals. Reducing US corporate taxes and closing loopholes has the potential to dramatically alter the competitiveness of American business and therefore the long-run equilibrium of the dollar.

"Without knowing all the details on the loophole closures, it’s hard to be definitive, but we (BMO FX Strategy) tend to view corporate tax reform as long-run positive for the USD."

"The President nominates appointees to the Fed’s Board of Governors as openings occur. The next President will nominate the successor to Janet Yellen as Fed Chairman when her term expires in January 2018. Trump would appoint mostly Republicans, who tend to be more hawkish than Democrats, although there isn’t a perfect mapping of that issue.

"The Fed’s rate path in 2017 probably wouldn’t be different under Trump, but over the span of several years, a FOMC that is gradually staffed with more hawkish members would likely to result in higher Fed base rates. This would be a USD-positive factor during the period the rates market priced it into forward curves."

Global Currency Reactions: "Making European Currencies Great Again!"

With Trump’s chances growing, the European foreign exchange markets outperform – even the CEE currencies like PLN, CZK, HUF – are nearly 2% up against the USD in early trading.

The Scandies are up 0.5% vs USD. The GBP, too, gained significantly, up 1% against the USD so far tonight.

The EUR and CHF are best performers in Europe: up more than 2%. The EUR/USD broke above the 200D moving average and the squeeze may continue to 1.13, and above.

"The SNB will have hard time this morning defending the EUR/CHF “soft floor”, but we still think the 1.07 should hold," says Johnny Bo Jakobsen at Nordea Markets.

We must also thank Jakobsen for the quip "Making European Currencies Great Again!"

Elsewhere, USD-MXN moved around 8% higher.

Prior to today, the largest gains in USD-MXN were during the depths of the Global Financial Crisis – 12.3% on Oct 10 2008, 7.68% on Oct 8 2008 and 6.38% on Oct 16 2008.

"If Trump prevails, with the focus on Mexico from a trade/immigration perspective, the move in USD-MXN could extend further," says Jason Daw at Societe Generale.

The South African Rand was also another notable loser owing to its status as an emerging market currency.

However, John Cairns at RMB in Johannesburg expects ZAR to recoup much of its losses:

"Based on the market sensitivity to the changing election fortunes overnight suggests USD/ZAR would go to 14.00 on a Trump win. It would be normal if initial rand moves overshot, with a rand recovery later in the day. Expect extremely high volatility: at least 50 cents on USD/ZAR in the 24 hours after the election is called, and as much as 30 cents per day in the following few days."

Credit: http://www.loverscrib.com/2016/11/dollar-trumping-us-dollar-gains-more.html?m=1

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