USD: Modest reaction if Hillary Clinton is elected as President – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has remained on a stronger footing in the Asian trading session ahead of today’s US Presidential election.

Key Quotes

“Financial markets reacted favourably to the FBI’s announcement that it has cleared Hillary Clinton over emails related to her private server. The latest polls released yesterday also revealed a modest widening of Hillary Clinton’s lead reinforcing the markets’ confidence that she will become President. Market participants will breathe a sigh of relief if she is elected welcoming the greater policy certainty which comes with the status quo candidate.

The initial market reaction to a Clinton win should be more limited as it is already viewed as the likely outcome. Fivethirtyeight.com’s models are now estimating a 70% probability that Hillary Clinton will become President. How Donald Trump reacts to defeat could act as a dampener on the initial relief rally. We believe there is scope for the US dollar to strengthen modestly heading into year-end as a December rate hike from the Fed would be almost a done deal. Long US dollar positioning although it has increased in recent weeks is still lighter than during most of last year.”