Global economy reacts to Trump’s win: Impact on Ukrainian business and currency

How US election affect global markets

Global markets have responded strongly to Donald Trump's victory in the US presidential election.

The US dollar is showing robust growth against a range of global currencies, marking its largest surge since March 2020. As of 16:32 (Kyiv time), Reuters reports the following declines in major currencies against the US dollar: the euro by 2.09%, the British pound by 1.43%, the Japanese yen by 1.71%, and the Chinese yuan by 1.02%.

Following the dollar, global stock indexes are also rising, though not all. The UK's FTSE 100 rose by 0.23%, while Japan's Nikkei 225 surged by 2.61%. However, the Euro Stoxx 50 — a stock index of the 50 largest companies in the Eurozone — fell by 0.77%.

The growth in stock indexes is accompanied by an upward trend in stock markets worldwide.

In contrast, commodity markets are experiencing a notable decline. Gold has dropped by 2.85%, copper by 3.44%, and Brent crude oil by 1.76%.

Amid this, the cryptocurrency market has shown an expected price surge. Bitcoin reached new highs, approaching $75,000 per coin. This was no surprise, given Trump's well-known pro-cryptocurrency stance, which many in the crypto community supported during the election.

Trump has previously pledged to implement several controversial measures if elected president, including: firing SEC Chairman Gary Gensler on his first day in office; creating a "National Bitcoin Reserve"; making the US the "global capital of Bitcoin"; eliminating capital gains tax on Bitcoin; supporting Bitcoin mining in the US; rolling back anti-crypto regulations; forming a "Bitcoin and Cryptocurrency Advisory Committee"; protecting the right to self-custody cryptocurrency; and rejecting the issuance of a US Central Bank Digital Currency (CBDC).

Growth in assets in Russia

According to The Moscow Times, Russian assets are also seeing gains. The Moscow Exchange Index rose on news of the US election results, and shares of major companies such as Sberbank, Gazprom, Novatek, VTB, NLMK, Surgutneftegas, Lukoil, Transneft, Sovcomflot, and Aeroflot have increased in value.

How US election impact Ukraine's economy

Meanwhile, Ukraine's debt market is also showing significant growth, with rising prices for Ukrainian Eurobonds and GDP warrants. Unfortunately, the hryvnia has seen an expected decline.

Shares of some Ukrainian companies listed on foreign exchanges are hitting records. For instance, shares of mining company Ferrexpo on the London Stock Exchange surged by 35%, while agribusiness MHP's shares rose by 3.45%. On the Warsaw Stock Exchange, shares of Ukrainian company IMC increased by 2.36%, and Astarta's shares by 0.63%.

Experts interviewed by RBC-Ukraine suggest that the rise in Ukrainian assets is likely tied to global investors’ expectations of a quick end to the war in Ukraine, which Trump has confidently promoted in recent months. However, this growth is more a result of a short-lived market reaction than a thorough analysis of the situation in Ukraine. What happens next remains uncertain, warns Alexander Paraschiy, head of the analytical department of Concorde Capital investment company. Trump represents considerable uncertainty, especially in terms of geopolitics. Yet for investors, “peace at any cost” is a source of optimism.

"We’re not talking about market forecasts here. It's likely a superficial, impulsive reaction to the election results based on Trump’s campaign promises of a swift end to the war in Ukraine," an expert said.

This optimism among international investors is currently driving up the prices of Ukrainian Eurobonds and GDP warrants, agrees Oleksandr Martynenko, head of corporate analysis at ICU Group. While it doesn’t imply significant liquidity, it’s a good sign for Ukrainian businesses.

At the same time, the hryvnia is under pressure due to the strengthening dollar. This was particularly noticeable in the early hours following the US election. By the afternoon of December 6, the pressure on the hryvnia had eased, either due to efforts by the National Bank or self-regulating market mechanisms, said financial analyst Andrii Shevchyshyn. The future course of the hryvnia will depend on the actions of the National Bank, which has sufficient reserves and tools to stabilize the currency.

As for Ukraine's economic outlook, the expert notes that the US election has created a mixed picture for the global economy, including Ukraine. While markets in the US, and partly in Ukraine and Russia, are optimistic, European and Asian markets are "in despair."

"The euro is falling. Trump's economic policy is predictably protectionist. Thus, Europe, which is currently not in the best economic shape, will stagnate. Since Europe is Ukraine’s main economic partner, a drop in demand for Ukrainian goods can be expected, which will hinder Ukraine’s economy," warns the analyst.

Regarding Ukraine's budgetary outlook and the National Bank’s ability to maintain the hryvnia's exchange rate, these will largely depend on the volume and schedule of financial assistance from international partners. US policy on the war in Ukraine will undoubtedly impact this situation.

"The prospect of a 'frozen' conflict in Ukraine would require the removal of currency restrictions to restore normal operations in the foreign exchange market, enabling the attraction of substantial investments for the country's reconstruction. Loosening currency restrictions will exert strong pressure on the hryvnia," an RBC-Ukraine source forecasts.

Regarding the unpredictable impact of the "Trump factor" on global politics and the economy, and thus on Ukraine, it will be essential to be prepared for swift and unconventional moves in volatile financial markets. According to Ivan Kompan, co-founder of First Kyiv Investment Club and lecturer at Edinburgh Business School, despite the short-term optimistic response of global markets to the US election results, the long-term economic outlook may not be as bright as it now appears. This reality must be faced, though simple and simultaneously effective solutions are lacking.