• The global financial landscape is shifting post U.S. election, with the dollar strengthening due to anticipated inflationary policies.
• The "Trump trade" has increased U.S. Treasury yields, while markets await U.S. inflation data.
• The euro struggles amid political uncertainty in Europe, while the Australian dollar falls due to slow wage growth.
• The financial markets continue to adjust to these developments, highlighting the interconnectedness of global economies.

The global financial landscape is witnessing a significant shift following the victory of Republican Donald Trump in the U.S. presidential election. The dollar is reaping the benefits of this political change, sitting not far from Tuesday's high of 106.17, its strongest since May 1. Investors are pricing in policies of lower taxes and trade tariffs under the incoming administration that are seen as inflationary.

The Republicans are inching closer to gaining full control of Congress, which would give the president-elect power to advance his agenda. This so-called Trump trade has also pushed up U.S. Treasury yields as markets wager the Federal Reserve may temper the extent of its future rate cuts.

However, the momentum slowed on Wednesday as markets awaited a fresh read on U.S. inflation, with the October Consumer Price Index (CPI) report to be released later in the day.

Global Market Reactions and Inflation Concerns

Charu Chanana, chief investment strategist at Saxo, suggested that the focus is likely to shift back to inflation and Fed policy in the latter part of the week. With investors already viewing Trump policies as inflationary, the market could be more sensitive if CPI comes in hotter-than-expected.

The U.S. dollar index, which measures the currency against a basket of currencies, tacked on 0.04% to 106.03. Bitcoin paused its record-breaking climb, down about 1% at $87,450 after hitting an all-time high of $89,998 on Tuesday. Trump has vowed to make the U.S. the crypto capital of the planet.

In Japan, wholesale inflation accelerated in October at the fastest annual pace in more than a year as renewed yen falls pushed up import costs for some goods, complicating the Bank of Japan's decision on how soon to raise interest rates.

Political Uncertainty and Currency Fluctuations

In Europe, the euro struggled for support amid political uncertainty as Germany, the bloc's biggest economy, is set to hold elections on Feb. 23, weeks after the collapse of Chancellor Olaf Scholz's governing coalition. Meanwhile, markets are pondering potential Trump tariffs against Europe, as well as China. The euro was pinned near a one-year low of $1.0595 hit on Tuesday, and was last down 0.09% at $1.0615.

In Australia, wages rose at the slowest annual pace since late 2022 in the third quarter amid an influx of new workers and an easing in inflation. This was reflected in the Australian dollar, which fell 0.05% to fetch $0.6529.

RBC strategists believe the greenback's gains are not yet exhausted, with the scale of Trump's win giving him a clear electoral mandate to pursue his policy agenda, they wrote in a note to clients. Most of Trump's policy proposals argue in favour of USD strength, even if he himself prefers a weaker currency.