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EUR/USD has hit a one-week high amid hopes for a decisive victory for Biden in the US elections but a ‘sell the fact’ response to an announcement and worrying covid statistics could change the picture, FXStreet’s Analyst Yohay Elam reports.  

Key quotes

“The former Vice-President  Joe Biden is leading against President Donald Trump in the electoral college – 253 to 214 according to the latest tallies and networks could project Biden as the winner at some point on Thursday. The president is trailing in the Grand Canyon State as well as in neighboring Nevada but hopes for a late victory in the final count.”

“Arizona, Nevada, and Georgia may declare winners on Thursday – perhaps late in the date. Winning any two would elevate Biden’s electoral college count to 270 or more – securing the White House. If not, it goes down to Pennsylvania. Are markets in a ‘buy the rumor, sell the fact’ mode? The well-known phenomenon could result in profit-taking if Biden is announced the inner.”

“Republican Senator Susan Collins won reelection in Maine, all but sealing Democratic hopes of flipping the upper chamber. This implies that the GOP could block a generous stimulus package and that should have dampened the mood. However, Senate Majority Leader Mitch McConnel said on Wednesday that he would be ready to talk about aid to states. All in all, hopes for stimulus are high while a split government implies low chances of tax hikes and regulation that markets dislike.”

“Apart from waiting for the results, markets will be paying attention to the Federal Reserve’s decision later in the day. The Fed is set to leave its policy unchanged after pledging to leave interest rates low at least through 2022.” 

“In Europe, coronavirus cases continue rising, with Germany surpassing the 20,000 marks. No new lockdowns are discussed for now, but the lack of improvement could result in new tough decisions for governments across the continent. COVID-19 has been off the radar in recent days and could return with a vengeance once the dust settles from the elections.”