In the final days of the US Presidential campaign, the United States Dollar is facing down rather substantial losses across the board on the heels of a flurry of new election polling over the weekend.
Overview
Investors are recalibrating the so-called “Trump trade” that has boosted USD and kept Treasuries high over recent weeks both in response to these new polls and more generally to moderate expectations into a Tuesday race that, as of now, is expected to be a dead heat. USD has dropped the most since September this morning – though national polling of a tight race is largely unchanged, some key swing state polling shifted in the favor of Vice President Kamala Harris and betting markets have responded by paring back bets on a Trump win in a big way.
Perhaps the most surprising poll came out of Iowa, showing that Harris as of last week has an unprecedented 3 point lead in the solidly red state. Though Selzer’s poll has, over the last few cycles, shown itself to be quite accurate in predicting the state’s final margins, it’s unclear whether a) this materializes this year and b) if such a change in margin is applicable through the rest of the swing state group and the country writ large, where polling remains neck-and-neck. Though the Dollar is a bit down today, markets are still taking a largely defensive position ahead of what is likely to be an extremely volatile week. Today may be the proverbial calm before the storm as polls close tomorrow evening.
It’s quite possible that we won’t have a declared winner of the Presidential election until later this week as early and mail-in voting remains historically high. There are, however, several other risk events on the table for the back half of the week as well, including a Federal Reserve interest rate decision as well as a Bank of England decision, both on Thursday. Though the Fed’s decision is less up-in-the-air than the election outcome, this week promises both high volume and high volatility as global uncertainty weighs heavily on the collective mind of the market. Monex USA will have election night coverage until roughly midnight Eastern on Tuesday.
What to Watch This Week…
- US General Election, Tuesday
- S&P Composite PMI OCT, Tuesday 10:45AM
- Bank of England Rate Decision, Thursday
- FOMC Rate Decision, Thursday 2PM
- Navigating Election Uncertainty – Webinar insights
- Tuesday Election Night Coverage – Extra Support Hours until midnight EST
- Monex USA Online is always open
JPY ⇑
Though Japan is closed for a market holiday, Japanese Yen has gained nearly a percent of ground against USD and is near the top of the G10 board this morning. After the Bank of Japan held interest rates steady last week, USDJPY in choppy trading closed the week close to flat, but risk on the US election is dominating the pair this morning. BoJ Governor Kazuo Ueda also shifted his tone last week and emphasized the risk currency authorities see in broad Yen weakness, and after Japan’s ruling party failed to maintain a majority in its own election, markets see the BoJ as the driving force behind JPY for the time being.
EUR ⇑
The single currency, after a week of lackluster trading, finally was able to rebound against USD in a pretty substantial way this morning, gaining roughly two thirds of a percent against USD in early trading. Of course, the US election is dominating headlines for the pair, as a potential Trump administration does signal the possibility for increased tariffs targeting the economic bloc. Given this, weekend polling showing a new swell of support for VP Kamala Harris has boosted EUR ahead of tomorrow’s election. Of course, we could see a stark reversal should Donald Trump close out a victory this week.
