EURUSD - Short
Ebury - the number 2 ranked EUR/USD forecaster on Bloomberg - have said the biggest risk to markets is not necessarily with which candidate emerges as president, but whether or not the vote is contested.
The prospect of an uncertain vote would reside with a close outcome or a pivotal recount. However, scenario modelling by FiveThirtyEight suggests the likelihood of the election hinging on a recount is a mere 4%.
Nevertheless, Trump has made noise in the past over the prospect of cheating in the postal vote, and with a record postal vote expected in an election that comes during the covid-19 pandemic, some kind of electoral challenge is not hard to imagine.
"In a situation where the vote is contested we think that this would be an initial dollar positive in the short-term as investors flock to the safe-haven currencies and sell higher risk assets. In the long-term, we view this as a dollar negative, particularly if not resolved in a swift fashion, given that it would raise serious concerns surrounding institutional quality," says Ebury Senior Market Analyst, Matthew Ryan.
The foreign exchange playbook suggests the Dollar would be a beneficiary of a contested election outcome given the anxiety it would generate. The Dollar - alongside the Yen and Franc - is considered to be a 'safe haven' currency that tends to appreciate in times of market anxiety.
On EUR side growing COVID 19 cases across the Eurozone, stalling economic growth and ongoing BREXIT uncertainty which will be the main topic for discussion in EU summit will be the main risks. We are expecting a short term drop in EURUSD value with a TP near 1.15848
The prospect of an uncertain vote would reside with a close outcome or a pivotal recount. However, scenario modelling by FiveThirtyEight suggests the likelihood of the election hinging on a recount is a mere 4%.
Nevertheless, Trump has made noise in the past over the prospect of cheating in the postal vote, and with a record postal vote expected in an election that comes during the covid-19 pandemic, some kind of electoral challenge is not hard to imagine.
"In a situation where the vote is contested we think that this would be an initial dollar positive in the short-term as investors flock to the safe-haven currencies and sell higher risk assets. In the long-term, we view this as a dollar negative, particularly if not resolved in a swift fashion, given that it would raise serious concerns surrounding institutional quality," says Ebury Senior Market Analyst, Matthew Ryan.
The foreign exchange playbook suggests the Dollar would be a beneficiary of a contested election outcome given the anxiety it would generate. The Dollar - alongside the Yen and Franc - is considered to be a 'safe haven' currency that tends to appreciate in times of market anxiety.
On EUR side growing COVID 19 cases across the Eurozone, stalling economic growth and ongoing BREXIT uncertainty which will be the main topic for discussion in EU summit will be the main risks. We are expecting a short term drop in EURUSD value with a TP near 1.15848
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