Trading the US elections, the quiet before the storm - TDS

Analysts at TD securities explained that, for now, they expect market moves ahead of the election to be well contained.

Key Quotes:

"A full but brief preview of the US Election and market implications can be found here. We have argued in the past that markets have tended to traded on the status quo, which is a Hillary Presidency.

From that perspective, a Trump victory would present the greatest amount of uncertainty and scope for volatility.

Should he win, we look for equities to fall under significant pressure.

While normally a risk-off move would trigger flight to safety, thereby providing support to the USD, the nature of the shock (being so US centric) might undermine the USD instead, and provide support to other reserves such as the EUR.

Nonetheless, there is scope for diverse performance for the USD including vs. EM and the CAD given that Trump’s policies at this juncture suggest uncertainty around trade policy in particular.

We would also look at AUD/JPY as the risk proxy trade that would be particularly vulnerable to the downside in the event of a Trump victory.

With markets in a wait-and-see approach, liquidity is thin, so we caution from reading too much into the intra-moves until the results begin to creep in key battleground States."