Analysts at MUFG Bank, point out there is not a clear pattern of performance during the three months prior to the elections. They warn that political turmoil in the US could weigh on the US dollar.
Key Quotes:
“Next week will mark an important point ahead of the US presidential election on 3rd November with Joe Biden expected to announce his running mate and potential Vice President.”
“Markets really need to brace themselves for a potential period of turmoil after the election. The closer the result under a Biden victory scenario, the greater the potential for Trump to question the legitimacy of the result which in turn raises the prospect of social unrest amongst Trump supporters.”
“The US dollar did weaken modestly in response to Trump’s tweet yesterday but we do not believe this election turmoil scenario is priced. Greater volumes of postal votes will undoubtedly also slow the process of getting a final result, again a very important potential issue if the election is close. RealClearPolitics currently has 201 Electoral Collage votes in “Toss-Up” states. It could still be a very tight election. We believe Biden will win but of course that win could be a narrow one and the consequences of that could be significant turmoil if Trump persists with the rhetoric ofdelegitimising a Biden victory. We see USD downside risks as this fear escalates.”
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