The apparent increase in support for Kamala Harris in the polls in the past few days has not necessarily been reflected in a broadly weaker dollar, perhaps attesting to the fact that markets were barely pricing in a Trump victory, and that the ‘Trump trade’ provided little more than modest support for the greenback.
This suggests room for a sizable dollar rally in the event of a Trump win on Wednesday morning, particularly under a Republican controlled Congress, while we think that a Harris victory would be bearish.
Last Friday’s weak labour market report contradicted strong third-quarter GDP data in the US, but this was blamed primarily on hurricane distortions. Wage and inflation data continue to show resilience and were it not for the US elections would probably warrant attention from the Federal Reserve when it meets on Thursday.
While the Fed will almost certainly validate market expectations and cut by 25bps. Market attention will focus on guidance for the next and last meeting of 2024, where expectations for a pause, while low, are starting to rise.
The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.
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