Key Takeaways
- 💵 UBS believes that the dollar has received a boost due to the return of the "Trump trade"
- 📈 Dollar rallies should be sold as Trump may not be outright positive for the greenback in the medium term
- 🗳️ U.S. election is too close to call, but Trump has gained ground and has a slim lead in some polls
- 🌍 Emerging market currencies like the South African rand and Mexican peso may remain favorable
- 📉 UBS forecasts limited upside for the dollar over the longer term, with euro-dollar moving towards 1.16 in 2025
- 🇨🇳 Chinese assets are lifted by Beijing’s stimulus measures and positive economic data
- 🇦🇺 Australian dollar is up, often used as a proxy for the Chinese yuan
- 📉 Chinese yuan faces largest weekly fall in over 13 months against a strong dollar
- 💰 Bitcoin rallies on speculation of softer cryptocurrency regulation under Trump administration
- 📉 Markets are calm despite downcast economic data
- 🌎 Global recovery hopes are supporting riskier assets
- 💱 Emerging market currencies like the South African rand and Mexican peso may be favorable for carry trades due to a more reform-minded government and existing risk premium respectively
The Impact of the US Presidential Election on Currency Markets
As the U.S. presidential election approaches, the currency markets are experiencing increased volatility and uncertainty. The resurgence of the "Trump trade" has provided a boost to the dollar, but UBS believes that rallies in the greenback should be viewed cautiously as Trump’s policies may not be beneficial for the currency in the medium term.
The U.S. election is too close to call, with Trump gaining ground in some polls, leading to a slim lead over Vice President Kamala Harris. This uncertainty has also impacted emerging market currencies like the South African rand and Mexican peso, which may remain favorable for carry trades.
UBS forecasts limited upside for the dollar in the longer term, with the euro-dollar expected to move towards 1.16 in 2025. Meanwhile, Chinese assets have been lifted by Beijing’s stimulus measures and positive economic data, with the Australian dollar often used as a proxy for the Chinese yuan.
Despite the dollar’s recent strength and market calmness, global recovery hopes are supporting riskier assets. Chinese yuan faced its largest weekly fall in over 13 months against a strong dollar, while Bitcoin rallied on speculation of softer cryptocurrency regulation under a potential Trump administration.
Overall, the currency markets are closely watching the developments of the U.S. election and the potential implications for different currencies as investors navigate through a period of uncertainty and volatility.