Daily thread to exchange ideas and to share your thoughts
Election day is turning into election week in the US, as the more tightly contested race for the White House yields no clear result at the end of the night. If things continue, we may not necessarily get a clear result until tomorrow afternoon perhaps.
But in any case, there might be more complications to follow if the courts are brought into this over the next few days.
The market is feeling rather jittery now after the early optimism as everything now hangs in the balance. This was a risk that should not have materialised if you go by the pollsters and boy, have they got it all wrong this year (again).
Anyway, as we are here now, we can only work with what we have in front of us.
The way I see it, there's only two likely outcomes:
1. Biden wins, Republicans hold the Senate
2. Trump wins, Republicans hold the Senate
I reckon risk assets would only prefer a Biden win if Democrats won the Senate race as well but that is a tall order in which I don't quite imagine is going to happen.
The dollar may lose some ground on the result but amid more gridlock in Washington, I just don't see how the market can be optimistic about that.
Given that scenario, the dollar may find some bids down the road on more fear/jitters.
As for stocks, I would argue at the end of it all, investors may see short-term reprieve regardless of the result. It is sort of like just to catch some breath.
But in the bigger picture, if no stimulus is coming, that won't bode well for risk.
If Trump wins, I imagine that stocks and the dollar will both rally should Republicans hold the Senate. The greenback already has shown some poise in moving over the last few hours but I would argue that gains may be more limited this time around.
My view is that we are not going to get a repeat of the 2016 melt up in the dollar and with stimulus to follow, the reflation trade narrative will quickly settle back in.
As such, I see scope for some dollar weakness once the dust settles after some short-term gains which could follow on the back of a Trump win.
What are your views on the market right now? Share your thoughts/ideas with the ForexLive community here.