Trump Inauguration: Dollar dips, stocks creep higher as his second term dawns

The dollar drifted lower and stocks were cautiously positive on Monday, January 20, as investors awaited an expected flurry of policy announcements during the first hours of Donald Trump’s second presidency and eyed a rate hike in Japan at the end of the week.

Read: Melania Trump launches cryptocurrency meme coin

Trump takes the oath of office at noon Eastern Time (1700 GMT), and promised a “brand new day of American strength” at a rally on Sunday, January 19.

New executive orders expected

He has stoked expectations of a slew of executive orders right away and, in a reminder of his unpredictability, launched a digital token on Friday, January 17, which soared above $70 before sliding to around $50 as traders turned uneasy.

Important-Hussain Sajwani: Gulf investments in US to soar under Trump

Monday is a US holiday, so the first responses to his inauguration in financial markets may be felt in foreign exchange and then during Asian trade on Tuesday.

“The fall back in Treasury yields revived equity markets, with European indices doing particularly well,” said a note from the Edmond de Rothschild Group.

Shorter-dated euro zone bond yields steadied by 0923 GMT.

“Trump dominates everything in terms of where we go,” Societe Generale chief FX strategist Kit Juckes said in his morning note, referencing markets in general and noting that trader positions betting on a rise in the dollar compared with other currencies had reached their highest since 2022.

The dollar is up more than 8 per cent on the euro EUR=EBS since September and at $1.0309 is not far from last week’s two-year high. But so much is priced in that some analysts feel a more gradual start to U.S. tariff hikes may draw out some sellers.

Threat of tariffs

Trump has threatened tariffs of as much as 10 per cent on global imports and 60 per cent on Chinese goods, plus a 25 per cent import surcharge on Canadian and Mexican products, duties that trade experts say would upend trade flows, raise costs, and draw retaliation.

Bitcoin BTC= shot up 4 per cent, hitting a record high of $108,943, while Trump’s newly-created cryptocurrency launched on Friday – known as $TRUMP – soared to nearly $12bn in market value, drawing in billions in trading volume. Melania Trump’s cryptocurrency launched on Sunday and hit a market cap of $1.9 billion.

China focus

China is in focus as the target of the harshest potential trade levies. Investors have cheered better-than-expected Chinese growth data and a Friday phone call between Trump and Chinese President Xi Jinping that left both upbeat.

Hong Kong’s Hang Seng HSI closed up 1.8 per cent and China’s yuan rallied.

“Everyone is waiting for these trade negotiations to begin and see what kind of attitude Xi Jinping takes with Trump,” Ken Peng, head of Asia investment strategy at Citi Wealth told reporters in Singapore at an outlook briefing.

“That relationship between the two gentlemen has become very important as a leading indicator of policies.”

The yuan is seen likely to slowly adjust to any shifts in trade policy and touched a two-week high of 7.3088 to the dollar CNY=CFXS.

Japan’s yen JPY=EBS rallied last week as remarks from Bank of Japan policymakers were taken as hints that a rate cut is likely on Friday, January 17.

It was last slightly stronger at 156.335 per dollar and rates markets priced about an 80 per cent chance of a 25 basis point rate hike.