USD is Trump dependent - Natixis

Nordine Naam, Research Analyst at Natixis, notes that the US dollar corrected sharply as Donald Trump closed the gap in the latest opinion polls for the presidential election on 8 November.

Key Quotes

“This weighed on risky assets, but not to such an extent as to enable the US dollar to play its role as a safe haven. However, the hawkish rhetoric of the Federal Reserve and the good October nonfarm payrolls should limit the greenback’s correction in the days leading up to the election.

Whatever the outcome of the US elections, the US dollar should recover, but if the next President is Donald Trump, this rebound will be short-lived. The EUR/USD should pull back towards 1.09 after the US elections, but if Trump wins, once the market upheaval has subsided, the EUR/USD will go on to rebound towards 1.15 over the next few weeks and towards 1.20 in coming months. If Hillary Clinton wins, the market will focus on the divergence in the monetary policies of the Federal Reserve and European Central Bank, as a result of which the EUR/USD is likely to decline to 1.07 at the year-end.”