Chart created with TradingView[1]
Fundamental Outlook: BULLISH
- US Dollar[2] may be at the mercy of political volatility from presidential debate, stimulus talks
- Greater election-related uncertainty, concern about timely aid package could hurt sentiment
- Slew of key employment data could dampen outlook for economy despite signs of a recovery
First Presidential Debate
Politically-induced volatility from the first 2020 US presidential debate between incumbent Donald Trump and Democratic nominee Joe Biden may spur demand for haven-linked assets like the Greenback. As mentioned in my article previewing the debate[3], while debates have not overwhelmingly influenced voter intention, the unique circumstances of this election – and all that is at stake – may prove differently this time.
For more updates on how politics impacts markets, follow me on Twitter @ZabelinDimitri[4].
If the debate causes a reversal in polling data – in this case, Biden losing his lead or having it significantly narrowed – traders may consider repositioning themselves. This reshuffling of capital to optimize their performance in the new political landscape could push the US Dollar higher if a premium is put on liquidity over returns.
US Fiscal Stimulus Talks
This risk-off dynamic may be amplified if policymakers are unable to find a middle ground and pass a coordinated fiscal stimulus package. Last week at a congressional testimony, Fed Chairman Jerome Powell warned that the downside risk of no further action may be reduced spending and the possibility of a people losing their homes. The prospect of this gloomy outcome may amplify losses in equity markets.
US Dollar Gaining vs AUD, EUR and S&P 500 Futures as Stimulus Talks Break Down, Covid-19 Cases Rise
EUR/USD[5] chart created using TradingView
Having said that, Democrats are drafting a $2.4
