Assassination Attempt on Trump: How are markets reacting?

• Assassination attempt seen boosting Trump’s presidential bid
   
• Bitcoin soared over 5%, breached 61k
   
• US Dollar stronger against all G10 currencies
   
• Mexican Peso weakest EM currency against USD
   
• Global stock indices ease lower

 

At the start of this trading week, the “Trump trade” is already evident.

The assassination attempt on former US President Donald Trump over the weekend appears to have boosted his chances at reclaiming the White House, at least in the immediate aftermath.

The images of Trump - fist in the air, blood streaking across his face, with the American flag waving overhead – is expected to galvanize his voter base in the lead up to the November elections.

This money-can’t-buy form of PR, amid this terrifying episode of political violence, isn’t lost on the markets.

Investors and traders are already beginning to price in the increased likelihood, at least for now, of Trump winning a second term as POTUS, and pre-empt the policies he intends to roll out or restore from 2025 onwards.

In short, this is known as the “Trump trade”.

 

 

Here's how the "Trump trade" is being manifested across various asset classes:

 

1) Crypto: Bitcoin surged as much as 5.4%, reaching $61k

Why did Bitcoin soar after Trump survived the assassination attempt?

Trump has positioned himself as a pro-crypto President.

In addition to the favourable comments made towards cryptocurrencies, he’s also scheduled to speak at a Bitcoin conference on July 27th.

Given the fact that cryptocurrencies trade 24/7, Bitcoin bulls charged on and pushed prices higher almost immediately as Trump was ushered off the stage.

 

 

2) Forex: US Dollar strengthens against all G10 peers and Mexican Peso

Why did the Dollar climb after Trump survived the assassination attempt?

Markets expect a resilient US dollar under a second Trump administration.

Given his desire to roll out tax cuts if he returns to the White House, that extra cash floating about in the world’s largest economy may boost demand levels, as well as inflationary pressures in tandem.

If so, that may prevent the Fed from substantially lowering US interest rates, to keep inflation under control.

Coupled with the US dollar’s “safe haven” status, no surprise that the US dollar started off the week on a stronger note.

NOTE: Investors believe “safe havens” will help protect their wealth during times of heightened uncertainty or fear.

 

Of the emerging-market currencies that are already trading at the time of writing …

the Mexican Peso was the weakest against US Dollar at the onset of the week.

The popular narrative is that Mexico will once again bear the brunt of Trump’s trade wars, should he return for another term.

This is despite the fact that the Mexican Peso actually strengthened by 9.2% between January 2017 until January 2021 – Trump’s first term in office.

Still, that isn’t stopping markets from pre-empting another round of tightened trade measures between the US and Mexico.

 

 

3) Global stock indexes: European, China stock indices edge lower

At the time of writing, FXTM’s EU50 index – which tracks Europe’s benchmark stock index, STOXX 50 – is edging lower.

 

Similarly, the CN50 index is also moderating lower, now testing its 21-day simple moving average (SMA) for immediate support.

 

Why are European/Chinese stock indexes falling after Trump survived the assassination attempt?

Markets also expect a return of the US trade wars with the EU and China – hallmarks from Trump’s first term in office.

Under Trump 2.0, those trade wars against the EU and China may return with a vengeance.

These trade wars are feared would further darken the economic outlooks for the Eurozone and China, weighing down their respective stock markets in tandem.

 

 

How long will the "Trump trade" last?

To be clear, the “Trump trade” may not see out the entire week, or even the entirety of the remaining 4 months until the November elections.

What today's price action shows is that markets remain sensitive to an already tumultuous campaigning season.

Who would’ve imagined the emergence of political violence on US soil not seen since 1981, when then-President Ronald Reagan was shot and wounded, and survived.

What's clear is that the “Trump trade” remains eager to show its presence across global financial markets.

Besides today, we already saw brief flashes of the "Trump trade" in the immediate aftermath of the Biden-Trump debate in late June 2024.

And we may well see further iterations of the “Trump trade” over the near-term.

Safe to say, it pays for investors and traders to remain vigilant and prepared to react.