FX Daily Strategy: APAC, November 6th
Focus on US election
Trump win likely to be a small USD positive, Harris win a bigger USD negative
Clean sweep for Republicans would likely be more of a USD boost
Wednesday’s markets are going to be about the US election. There is no significant data on the calendar, so we will just set out our expectations for the FX markets under the three main scenarios.
Trump win, split Congress
USD gains around 1% supported by rising US yields on the expectation of higher tariffs and potentially some more tax cuts. Equities may not do much, since higher yields will offset any gains from expected tax cuts, and there will be some concern about the impact of tariffs, but this still likely means a lower equity risk premium.
EUR/USD down 0.5%, USD/JPY up around 1%, AUD/USD down 1.5%.
Trump win, Republican clean sweep.
USD gains more aggressively as market anticipates larger tax cuts, particularly corporate tax cuts. Equities and yields up.
EUR/USD down 1.5%, USD/JPY up 2%, AUD/USD down 2%. JPY weakness may be limited by BoJ intervention.
Harris win, split Congress
Steady as she goes, not much policy change, recent rises in US yields partially reversed. USD falls across the board, JPY makes most substantial gains
EUR/USD up 1.5%, USD/JPY down 2.5%, AUD/USD up 2%
