Expectations of an imminent victory by Donald Trump in the US election pushed the dollar higher in early trading, with Treasury yields soaring with the return of the so-called Trump trade.

Trump, whose Republican Party is also poised to claim both Congress and the Senate, has already declared victory.

Data from overnight and early morning polls in the UK showed Trump ahead in several key states, with the Republican candidate ahead of Democrat Kamala Harris by 266 votes to 194 in the electoral college as of 0730 GMT – just in below the 270 needed to win.

The Fed is still expected to cut interest rates at its meeting which begins today. The Bank of England is also expected to cut its policy rate by 0.25 percentage points to 4.75 percent tomorrow.

Donald Trump declared victory for another term as US president

But markets believe that Trump’s second-term policies would be inflationary, potentially significantly reducing the size of future Federal Reserve interest cuts.

Interest rate forecasts have been revised downwards in recent weeks.

This perception saw Treasury yields resume their climb, with the 10-year rate climbing as much as 18 basis points to 4.47 percent, its highest level since July.

The 10-year yield had already climbed more than 40 basis points in the month preceding the US elections.

The US dollar also soared, gaining 1.3 per cent against the pound sterling to £0.777 and 1.8 per cent against the euro to €0.931.

Trump is seen as good for stock markets dominated by big US tech companies and the FTSE 100 reacted to sentiment and the fall in sterling, which flatters UK stocks, by jumping 1.13 per cent to 8,365 at the start of the session.

The so-called Trump deal has sent Treasury yields soaring over the past month.

Francesco Pesole, FX strategist at ING, said: “The bearish steepening and widespread selling across the Treasury yield curve reflects widespread expectations of an inflationary mix of domestic (fiscal and migration) and external (tariff rates) policies of Trump’s part.

“We are also seeing some action in short-term dollar swap rates, linked to a hawkish reassessment of the Fed’s rate expectations.

“In line with our expectations and consensus, markets are sticking to expectations of a 25 basis point (Fed) cut to 4.75 percent tomorrow, but the OIS curve has recorded a revaluation of more than 10 basis points on 2025 maturities.

“This incorporates a policy rate close to 4 percent in June 2025, almost 100 basis points higher than mid-September prices.”

U.S. stock markets posted their best day in six weeks on Tuesday, which many market commentators saw as an indication that investors were anticipating an imminent Harris victory.

Shares of social media company Trump Media & Social soared more than 15 percent on Tuesday before plunging to end the day down 1.1 percent.

Bitcoin hits record high

Meanwhile, Bitcoin hit a new all-time high of $75,371.69, surpassing the previous record high of $73,797.98 in March. Trump and the Republican Party are seen as more positive for crypto markets.

Lindsay James, investment strategist at Quilter Investors, said: “While the long-term US election has had minimal impact on stock markets, investors will likely view Trump’s presidency as a positive for stock prices in many American companies.

“With proposed corporate tax cuts coupled with high tariffs on imports, the profitability of U.S. companies is expected to improve, although the tariffs will spark an international response and far-reaching consequences.

“Indeed, in our recent survey of some of the world’s largest asset managers, a Trump presidency was seen as marginally positive for markets, compared to no change for a Kamala Harris administration – while highlighting its volatile nature , the diversity of opinions in favor of Trump. was much bigger.

“Volatility will likely be the defining characteristic of this presidency.”