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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Market reacts to potential Republican sweep: shifts in Treasury yields and bitcoin surge

Financial markets are reacting strongly to the possibility of a Republican victory, with stocks, currency, and cryptocurrency seeing notable shifts.

USA Nasdaq Source: Adobe images

Market reaction to potential Republican sweep

After stumbling on Monday following the release of weekend polls indicating a tight White House race, the market appears poised to invest in trades that could benefit from a Republican sweep.

Electoral college update

As the electoral college tally unfolds, Trump holds a significant lead over Harris. According to CNN, Trump has secured 211 votes, while Harris holds 153. The Associated Press reports Trump with 230 votes compared to Harris's 179.

With 270 votes needed for victory, key states like Wisconsin, Michigan, Pennsylvania, and Nevada remain too close to call.

Potential Republican policies

A Republican sweep could usher in notable policy changes, including Trump’s proposed 10% universal tariffs on most imports, affecting allies like the European Union (EU) and Japan. For Chinese imports, tariffs could escalate to 60% or more if he secures the presidency.

Fiscal expansion would likely follow a Republican sweep, with increased spending, lower taxes, and rising debt. Trump plans to make the 2017 personal tax cuts permanent and reduce the corporate tax rate to 15% for domestic manufacturers, which could further widen the deficit, currently at a significant 6% of gross domestic product (GDP).

Cryptocurrency and equities trends

The potential for a pro-crypto Republican administration has pushed bitcoin to a record high of $75,080, up 7.15%. Momentum suggests a run towards $80,000 could be within reach.

US equity futures are also trending up, with the S&P 500 gaining 1.20% to 5882, and the Nasdaq 100 adding 1.27% to 20,600.

Market movements

Markets are reacting in textbook fashion to these expectations.

  • US 10-year Treasury yields have jumped 17 basis points (bp) to 4.44%, a four-month peak
  • US dollar index (DXY) has surged 1.42% to 104.99, its highest level in four months
  • USD/JPY has traded above 154.00 for the first time since July’s turbulence
  • AUD/USD has fallen 1.8% to a three-month low of 0.6512, underlining its vulnerability to tariffs and the possibility of a trade war.

Provided the trend in voting observed during today’s Asian session continues in favour of Trump, we expect many of the moves highlighted above to extend into the sessions ahead. However, if the Democrats were to claw back lost ground, the US election could still bring a sting in the market’s tail.

AUD/USD daily chart

AUD/USD daily chart Source: TradingView
AUD/USD daily chart Source: TradingView
  • Source: TradingView. The figures stated are as of 6 November 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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