HSBC: EUR/USD likely to see short-lived rally on Harris win, followed by gradual decline

HSBC anticipates a knee-jerk rally in EUR/USD if Kamala Harris wins the US election, driven by initial USD weakness. However, they expect this rally to be temporary, with the pair likely resuming a downward trajectory as monetary policy differences reassert influence.

Key Points:

• A Harris victory is likely to cause a short-term EUR/USD rally, reflecting initial market relief and USD retreat.
• The rally may lack durability, as a Harris presidency, especially with a divided Congress, would be seen as maintaining the status quo.
• HSBC expects that after the initial rally, factors like relative growth and monetary policy divergence will favor the USD, resuming downward pressure on EUR/USD.
• Following October’s sharp drop in EUR/USD, any post-election decline would likely be gradual rather than steep.

Conclusion:

HSBC foresees a temporary boost in EUR/USD on a Harris win, but with limited long-term impact. After an initial spike, they expect relative monetary policies and growth outlooks to favor the USD, leading to a slow and steady decline in EUR/USD rather than an abrupt fall.

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This article was written by Adam Button at www.forexlive.com.