How is the global economy reacting to Trump's victory, what does it mean for Ukrainian businesses, and what will happen to the hryvnia?

The impact of Donald Trump's victory in the US presidential elections on the global economy, currency exchange rates, gold and oil prices, the cryptocurrency market situation, the cost of Ukrainian state debts and domestic businesses, as well as the prospects for the hryvnia – read more in the review by RBK-Ukraine.

How US elections affect global markets

Global markets are reacting strongly to Donald Trump's victory in the US presidential elections.

The US dollar shows a confident increase against a number of world currencies – the most significant strengthening since March 2020. According to Reuters at 16:32 (Kyiv time), the decline of the major world currencies against the US dollar was as follows: euro – (-)2.09%, British pound – (-)1.43%, Japanese yen – (-) 1.71%, Chinese yuan – (-)1.02%.

Following the dollar, global stock indices are rising, but not all. For example, the British FTSE 100 increased by 0.23%, while the Japanese Nikkei 225 rose by 2.61%. However, the Euro Stoxx 50 – a stock index consisting of the 50 largest companies in the Eurozone – decreased by 0.77%.

The rise in stock indices is accompanied by upward dynamics in the global stock market.

In contrast, the commodity market is experiencing a noticeable decline. For instance, gold has dropped by 2.85%, copper has lost 3.44% in value, and Brent crude oil has decreased by 1.76%.

Against this backdrop, the cryptocurrency market has shown the expected price surge. Bitcoin has reached new price highs, coming close to the $75,000 mark per coin. This came as no surprise, as Trump is known for his liberal statements regarding the prospects of the crypto market, whose representatives actively supported him during this election.

It suffices to mention a few controversial intentions that Trump publicly promised to implement if elected president. Among them are: firing the chairman of the US Securities and Exchange Commission (SEC) Gary Gensler on his first day in office; creating a "National Bitcoin Reserve"; making the US the "world capital of Bitcoin"; abolishing the capital gains tax on Bitcoin; supporting Bitcoin mining in the US; reversing anti-cryptocurrency regulations; forming an "advisory committee on Bitcoin and cryptocurrencies"; protecting the right to self-custody of cryptocurrency; and abandoning the issuance of a central bank digital currency (CBDC).

Assets are also rising in the aggressor country. According to The Moscow Times, the Moscow Exchange Index increased with morning news about the US election results, and shares of major companies – Sberbank, Gazprom, Novatek, VTB, NLMK, Surgutneftegas, LUKOIL, Transneft, Sovcomflot, Aeroflot – are also gaining value.

How US elections impact the Ukrainian economy

Amidst this, the Ukrainian debt market is also showing significant growth. In particular, the prices of Ukraine's Eurobonds and GDP-linked bonds are rising. However, unfortunately, the hryvnia is expected to depreciate.

Moreover, the stock prices of individual Ukrainian companies on foreign exchanges are hitting records. For instance, shares of the mining company Ferrexpo on the London Stock Exchange surged by 35%, while shares of the agricultural holding "MHP" rose by 3.45% there as well. On the Warsaw Stock Exchange, shares of the Ukrainian company "IMC" increased by 2.36%, and "Astarta" by 0.63%.

Experts surveyed by RBK-Ukraine note that the rise in the prices of Ukrainian assets is likely linked to global investors' expectations for a swift end to the war in Ukraine, as Donald Trump has convincingly "sold" to his voters in recent months. However, this growth is more a result of a short-term emotional market reaction rather than a product of deep analysis of the situation in Ukraine. What happens next is a big mystery, warns Alexander Parashiy, head of the analytical department of the investment company Concorde Capital. Donald Trump embodies significant uncertainty, primarily geopolitical. But for investors, "peace at any cost" – is a factor of optimism.

"Currently, there are no market forecasts. It is more about a superficial impulsive market reaction to the election results, based on Trump's pre-election promises regarding the quick end of military actions in Ukraine," – the expert states.

It is precisely on this optimism of international investors that the value of Ukrainian Eurobonds and GDP-linked bonds is noticeably increasing, agrees Alexander Martynenko, head of the corporate analysis department at the ICU group. While liquidity is not very high, this is already a positive sign for Ukrainian businesses.

At the same time, the Ukrainian hryvnia is under pressure due to the strengthening of the dollar. This was particularly noticeable in the early hours following the conclusion of the US elections. In the afternoon of December 6 – either due to the efforts of the National Bank, or as a result of self-regulating market effects – the pressure on the hryvnia eased, describes financial analyst Andriy Shevchishin. Moving forward, everything will depend on the actions of the National Bank, which has sufficient reserves and tools to influence the currency market to prevent significant depreciation of the hryvnia.

As for Ukraine's future economic prospects, the interlocutor notes that the US elections have created an ambiguous situation in the global economy, including for our country. While the market in the US, partly in Ukraine and Russia is optimistic, – the markets in Europe and Asia are "in despair."

"The euro is falling. Trump's economic policy is predictably protectionist. Therefore, Europe, which is currently not in the best economic shape, will stagnate. And since Europe is Ukraine's main economic partner, a decline in demand for Ukrainian goods is to be expected. All of this will restrain Ukraine's economy," – the analyst predicts.

Regarding Ukraine's budget prospects and the National Bank's ability to maintain the hryvnia exchange rate – they will primarily depend on the volumes and schedule of financial aid inflows from our partners. And US policy regarding the war in Ukraine will undoubtedly influence the situation.

"One way or another, the prospect of a "freeze" of the war in Ukraine will require the lifting of currency restrictions. This will be necessary to restore the normal functioning of the currency market, through which significant investment funds can be attracted for the country's recovery. Easing currency restrictions will be a strong factor putting pressure on the hryvnia exchange rate," – the RBK-Ukraine interlocutor forecasts.

As for the unpredictable influence of the "Trump factor" on global politics and economics, and consequently on Ukraine, we need to be prepared for rapid and unconventional steps in the context of volatile financial markets. According to Ivan Kompan, co-founder of the First Kyiv Investment Club and lecturer at the Edinburgh Business School, despite the short-term optimistic reaction of global markets to the US election results, long-term economic prospects may not be as rosy as they currently seem. And we simply need to be ready for this. However, there are no simple and simultaneously effective solutions here.