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The US dollar is continuing to benefit from the deteriorating outlook for growth in Europe. It has helped to lift the dollar index back towards the top of its recent trading range between the 92.000 and 94.000-levels ahead of the US Presidential election. The latest polls released over the weekend have not materially altered expectations that Joe Biden is on course to become President, which would be a bad outcome for the USD outlook, economists at MUFG Bank brief. 

Key quotes

“The latest polls released over the weekend have not materially altered expectations that Joe Biden is on course to become President. Bloomberg has reported that New York Times/Siena College polls showed Biden ahead in the key battleground states of Pennsylvania, Florida, Arizona and Wisconsin. A CNN poll showed Biden ahead in Arizona, Michigan and North Carolina. Florida though still appears more evenly balanced. An ABC/Washington Post poll showed that President Trump has narrowly ahead in Florida by 2 percentage points. The races in Ohio and Iowa are also seen as closer.” 

“According to polling experts Five Thirty-Eight, Joe Biden has around a 90% probability of becoming President. But they are warning that Donald Trump can still win. One area of concern for Joe Biden is his lead in Pennsylvania, the most likely tipping point state, which has averaged about 5 percentage points. A solid but not spectacular lead.”

“President Trump’s chances of winning are significantly lower than the 35% chance they had attached prior to this point in the 2016 election. If the polls prove more accurate on this occasion, the election outcome could help to dampen the US dollar’s recent upward momentum.” 

“We continue to believe that the worst outcome for the US dollar would be if there was a Blue Wave and the Democrats took control of the Senate. Expectations for larger fiscal stimulus and improving global trade relations would support risk assets and help weaken the US dollar. However, if there is a surprise and the Democrats fail to take control of the Senate and/or Donald Trump remains President, it could reinforce US dollar strength.”