Pound (GBPUSD=X)

The pound nosedived against the dollar, plummeting to near 1.2909 in early London trading hours on Wednesday after Republican candidate Donald Trump claimed victory over Democratic rival Kamala Harris in the US presidential election.

The pound’s decline marks a significant sell-off as traders brace for a shift in US economic policy under the prospect of a second Trump administration. In tandem with sterling’s fall, the US dollar surged to its largest single-day gain since March 2020, climbing 1.5% against a basket of major currencies.

Kyle Chapman, FX markets analyst at Ballinger Group, described the dollar’s rise as "nothing short of a rocket launch" after Trump’s sweeping victories in key battleground states such as Georgia, North Carolina, and Pennsylvania.

With The New York Times projecting a greater than 95% chance of Trump’s victory, Chapman noted that markets were now fully pricing in the possibility of a second term for the former president, which is expected to bring inflationary pressures and a continuation of aggressive tariff policies.

Read more: FTSE 100 LIVE: European stocks, dollar and bitcoin soar as Donald Trump declares US election victory

“This is the best day for the dollar in four years,” Chapman said, adding that the foreign exchange market for major currencies — colloquially known as "G10 FX" — was experiencing “a bloodbath” as investors scrambled to adjust their positions.

Against the euro (GBPEUR=X), sterling was slightly higher, trading at €1.1989.

Gold (GC=F)

Gold prices were lower as investors moved away from the safe haven and into assets that could benefit under a Trump 2.0 administration.

Spot gold was lower at $2,720.00 per ounce, while US gold futures slipped 0.5% to $2,733.50.

The drop in gold comes amid a broader market reaction to the US presidential election, which is dominating investor sentiment this week. "

It’s 95% about the US election this week, with a 5% splash of the Federal Reserve to add a touch of spice," said Kyle Rodda, financial market analyst at Capital.com.

Read more: Stocks to watch if Donald Trump wins the US election

Rodda explained that while gold typically gains in times of political uncertainty, it could eventually benefit from a Trump victory over the longer term. "Gold is a part of the Trump trade," he noted, citing expectations of massive deficit spending and the potential for more unpredictable US foreign policy under a second Trump administration.

However, traders are also keeping an eye on the Federal Reserve’s two-day policy meeting, which concludes Thursday, with market participants anticipating comments from chairman Jerome Powell for further clues on the central bank’s stance on interest rates. The Fed’s outlook could influence the direction of gold in the coming weeks, as rising rates tend to weigh on the precious metal.