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As the November 5 US presidential election approaches, Credit Agricole analyzes the potential impacts on the US dollar, noting improving odds for a Donald Trump victory and the subsequent market reactions.

Key Points:

• The rising likelihood of a Donald Trump win has led to renewed interest in “Trump trades,” contributing to a rally in the USD.
• The key considerations for FX investors are the extent of the potential USD gains from a Trump victory versus the possible downside if Kamala Harris wins.
• Despite the ongoing uncertainty surrounding the election outcome, FX Positioning data indicates that investors are not heavily long on the USD.
• Recent USD gains are partially attributed to a reassessment of the market’s dovish Federal Reserve outlook, spurred by positive US economic data surprises.
• Global corporates appear to have completed their FX hedging programs for the year, reducing the typical year-end USD-selling pressure.
• A Trump victory, along with a Republican majority in Congress, could lead to a stronger USD as more investors may engage in “Trump trades,” while subdued corporate selling could support the currency.
• A Harris victory is unlikely to trigger a significant USD sell-off, in contrast to the decline seen after Joe Biden’s win in 2020, due to the USD’s enduring rate advantage and the resilience of the US economy.

Conclusion:

Credit Agricole suggests that the USD could experience significant upward momentum if Trump secures the presidency, while the impact of a Harris victory would likely be muted, reinforcing the USD’s strong positioning in the current market context.

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

The risk mood is slowly deteriorating after a strong start. The S&P 500 is up just 10 points after rising is much as 50 pips. The trend has been steady and I haven’t seen any headlines that would explain the moves. I’d chalk it up to angst around the election.

AUD/USD is now trading at the lowest since August 15.

What’s particularly worrisome is that Treasury yields are ticking higher again. There was a NYT/Sienna poll today that showed some momentum for Trump and that could have bond buyers worried about a red sweep and larger deficits.

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

Wow Nellie. We have a horse race.

The final CNN poll has Trump and Harris deadlocked at 47%.

Earlier today NYTimes/Siena College poll in its final poll also showed a dead heat as well.

This article was written by Greg Michalowski at www.forexlive.com.

Shares of Nvidia are up 2.4% today while Apple has gained 0.7%. That’s enough to nudge Nvidia past Apple and re-claim the throne as the world’s most-valuable company, a title it briefly held earlier this year.

What NVDA hasn’t been able to do is sustainably hold above the June high of 143 but it’s trying to do that today and it will be an important level in to the close.

Nvidia is now worth $3.53 trillion, which is a lot of computer chips. Apple is worth $3.52 trillion.

Looking more broadly, the market has been sliding after a strong start with the S&P 500 now up 0.5% after rising as much as 0.9%. The Nasdaq is up 1.1% with all the chipmakers strong today.

The Dow is lower on the day as McDonald’s falls 2.2% and financials slide.

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

Closing changes in Europe on the day:

• Stoxx 600 flat
• German DAX flat
• France CAC -0.1%
• UK FTSE 100 -0.2%
• Spain IBEX -0.3%
• Italy’s FTSE MIB +0.1%

On the week:

• Stoxx 600 -1.2%
• German DAX -1.0%
• France CAC -1.5%
• UK FTSE 100 -1.3%
• Spain IBEX -1.0%
• Italy’s FTSE MIB -1.3%

The DAX hit a record last week but was reeled back in this week before bouncing.

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

Canadian Prime Minister Justin Trudeau is fighting for his political life and yesterday he came as close as he ever has to admitting a mistake. His government dropped immigration targets for the next three years by around 20%.

Next year’s target will instead be 395,000 new permanent residents, and that will fall to 380,000 in 2026 and 365,000 in 2027.

Much of those will be drawn from temporary workers and foreign students already in the country and as a result, the federal government estimates Canada’s population will decline
slightly by 0.2% in 2025 and 2026, before returning to growth of
0.8% in 2027.

Now those numbers are far from written in stone and are subject to change (potentially downward with an election given public sentiment). However I have a hard time seeing them revised upward.

If you back out Canadian growth, it’s declined on a per capita rate in seven of the past eight quarters.

Consumer spending has also fallen on a per capita basis. All that to say that Canada would be in a recession if not for massive population growth.

Well that’s coming to an end at a time when the housing market is also struggling and any new government is highly likely to cut public spending.

Add it up and USD/CAD is thinking about breaking a series of post-pandemic highs ranging from 1.3900 to 1.3975.

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

The Atlanta Fed GDPNow tracker for Q2 was trimmed to 3.3% from 3.4% today. The economist consensus for Wednesday’s advanced report is 3.0%.

After recent releases from the US Census Bureau and the National
Association of Realtors, the nowcast of third-quarter real gross private
domestic investment growth decreased from 3.2 percent to 2.7 percent.

That’s some good growth but yesterday I wrote about the important question: What would it look like without deficits near 7% of GDP?

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

• Prior was 68.9
• Current conditions 64.9 vs 62.7 prelim
• Expectations 74.1 vs 72.9 prelim
• 1-year inflation 2.7% vs 2.9% prelim
• 5-year inflation 3.0% vs 3.0% prelim

Expect a big swing shortly in the sentiment of about half of Americans.

In the aftermath of this report, US equities are at the best levels of the day with the S&P 500 up 49 points, or 0.8%.

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

• Prior was 0.0%

There are some dark days ongoing for new Canadian condos and suburban housing projects. It’s not everywhere but there are certainly some that are bleeding.

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

• Prior month 0.0% revised sharply lower to -0.8%
• Durable goods orders -0.8% versus 1.0% expected
• Prior month ex transportation 0.5% revised to +0.6%
• Ex Transportation 0.4% versus -0.1% expected
• Non-Defense cap Ex air 0.5% versus 0.1% expected. Prior month 0.2%
• Durable goods ex defense -1.1% versus -1.3% last month (revised sharply lower from -0.2%)

Ex transportation may have had an impact from the Boeing strike. Big revisions prior month. The Non-Defense Cap ex air at +0.5% is a good number and should increase Q3 growth as a result.

This article was written by Greg Michalowski at www.forexlive.com.

• Prelim was +0.5%
• Sept preliminary +0.4%
• Ex-autos -0.7% vs +0.3% expected
• Prior ex-autos +0.4%
• Ex-autos and gas -0.4% vs +0.6% prior

Prior to this report, RBC looked at its cardholder data and said spending was “nothing short of abysmal”.

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

Despite recent poll shifts favoring Trump, market pricing remains cautious, according to Deutsche Bank.

The extent to which a Trump win is being priced in remains cautious despite discussions about “Trump trades” in the market. DB illustrates this in both the FX market via the US dollar and a basket of the S&P 500 companies most
sensitive to tariffs.

The drop from 1.12 to 1.09 in EUR/USD is mainly due to the repricing of Fed expectations following strong US payroll numbers, they argue. Only the recent decline reflects changes in US election probabilities. They also note that a basket of S&P 500 companies sensitive to tariffs has been moving sideways, only recently starting to underperform, mirroring recent polling trends.

“The market has started to price an increasing
probability of a Trump win, but the degree to which this is impacting market
pricing is still quite modest,” Deutsche Bank writes.

Bank of America made a similar point this week.

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