Markets and Politics: The Connection to the US Presidential Election
Market Reactions to Political Turbulence
Markets are holding their breath at the start of a big week. The US presidential election on Tuesday is the biggest event this week, and traders are firmly focused on a jittery dollar on Monday amid a tight race between Vice President Kamala Harris and former President Donald Trump.
Current Status of the Dollar
On Monday, the US Dollar Index — which measures the greenback against a basket of six major currencies — was 0.5% lower at 3:27 a.m. ET. Meanwhile, the US dollar was 0.6% lower against the Japanese yen, and the euro was 0.5% higher than the dollar.
Impact of Polls on Currency
The dollar lost ground after weekend polls showed the odds of a Republican sweep falling, and the likelihood of a Democratic win with a split Congress increasing, according to Tony Sycamore, a market analyst at trading platform IG. Polls suggesting that Trump’s odds are diminishing could pressure the dollar. This stems from Trump's pledge to impose widespread tariffs on imports, which would stem currency outflow and drive up inflation and interest rates — factors that typically support the greenback.
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