The results of the 2024 US presidential election sparked a significant shift in corporate foreign exchange (FX) hedging strategies in the global market, with most companies now adjusting their FX programs.

Following the US election outcome that saw Donald Trump win a second term, many businesses in the US and UK are reportedly re-evaluating their risk management approaches, MillTechFX's Q3 report highlighted.

Over 90% of companies are adjusting their FX programs with the sharp surge in the dollar sharp surge and an unpredictable economic landscape. Most companies are reportedly opting to increase hedge ratios and extend the duration of their hedges.

Post-Election FX Surge

The immediate aftermath of the US election saw the dollar rally sharply, experiencing its largest single-day gain in eight years. Shifts in US leadership have historically had significant effects on the currency markets, and this year proved no different.

Following Trump’s unexpected 2016 victory, the dollar reportedly surged by 5%. In 2020, Biden’s win led to a similar decline in the greenback’s value. This time around, however, Trump’s return to the Oval Office triggered a dramatic market response, especially as early results pointed toward a second term.

The immediate dollar spike against major currencies such as the euro, yen, and sterling caught the attention of corporate risk managers and investors alike. In response to volatile market conditions and growing uncertainty, a staggering 94% of US and UK corporations have reworked their FX hedging strategies.

The most common adjustments are increasing hedge ratios, buying more protection against currency fluctuations, extending the length of hedges, and locking in rates for longer periods. Interestingly, there is a noticeable regional divergence in sentiment. UK-based companies appear more optimistic about the potential economic environment under Trump than their US counterparts.

Despite concerns over possible trade tensions and tariffs, many UK businesses believe that their economy, more focused on domestic markets, will be better insulated from global uncertainties.

Inflation and Interest Rates

In contrast, US corporates are taking a more cautious approach, increasing the duration of their hedges as they prepare for a protracted period of market volatility .

Inflation remains a major factor influencing hedging decisions, particularly for UK firms. In October 2024, inflation in the UK reportedly rose to 2.3%, driven by higher energy prices and new government measures.

Meanwhile, US companies remain concerned about tighter credit conditions, which have become a growing challenge in the wake of the election. As 2024 winds down, many US and UK corporations hope for stability after a year marked by political volatility, inflationary pressures, and economic uncertainty.

For CFOs and finance teams, the focus is now on finding ways to navigate the challenges posed by geopolitical risks, inflation, and tightening financial conditions without adding further complexity to their operations.