It’s Election Day in the U.S. and no other event matters financial markets more than this historical presidential election. The U.S. dollar slightly strengthened amid speculation that a Clinton win is more likely and therefore will pave the way for the Federal Reserve to raise interest rates next month.
Let’s briefly summarize the main points:
- Final polls show a small but not insurmountable lead for Clinton
- Results will start to come in after polls begin closing at 23:00 UTC (6 p.m. Eastern time)
- Voting across the country will finish at 6:00 UTC (1 a.m. EST)
- 4:00 UTC (11 p.m. EST) Earliest possible time to announce the winner.
- Trump win would send the USD lower, at least initially. In the long-run, the dollar may strengthen on tax cuts and spending increases. The markets will face increased volatility and uncertainty. Risk-aversion will dominate.
- Clinton win would send the USD higher as the focus shifts to Fed rate hike in December. Her victory could reinvigorate a fresh dollar rally while investors would become less risk-averse.
- A tight race between Clinton and Trump would add uncertainty, which would be dollar-negative in the hours after the election.
As the price action will be determined by the latest polls, traders should prepare for both scenarios. In case of a Trump win, both of our major currency pairs will trade higher. Thus the euro could rise towards 1.12-1.1250 and even towards 1.14. The British pound could rise towards 1.2670/1.27. In case of a Clinton win however, the euro could fall towards 1.08 whereas the British pound might drop back towards 1.21. Let’s be surprised.
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