Likely impacts of the US election on financial markets (for AUD/USD, a Trump win means lower)

Author: Eamonn Sheridan | Category: News

There is a barrage of commentary on how the election will impact.

Here are some in brief comments from a local Australian securities house, ComSec (part of CBA), bolding mine:
  • A close election is expected with a contested outcome considered the 'worst case' scenario for financial markets. An expected surge in postal voting due to the pandemic, continuing civil unrest and a possible lift in virus infections in colder months ahead of the election could add to uncertainty. 
  • We find that sharemarket corrections and recessions reduce the likelihood of an incumbent President winning a second term in the Oval Office. 
  • Professional investors are buying protection for their portfolios against expected volatility as the equity risk premium builds ahead of the election - which is already the most expensive event risk on record. 
  • Commonwealth Bank Group currency strategists expect a small Aussie dollar reaction if Mr. Biden wins office. But a large fall could be recorded for the Aussie against the greenback should President Trump be returned for a second term.
The note is longer, this is just a summary.

The AUD view seems based on the move for AUD in 2016 when it became clear Trump would win (AUD fell) 

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