How does the US dollar track Biden's chances of winning the November election?

2024-06-04 2171

    Although there are still five months left until the November US presidential election, analysts are still expressing their views on the potential impact of the election on financial markets.

    Deutsche Bank strategist Alan Ruskin gave an example: in a report on Sunday, he wrote that since the beginning of 2024, the correlation between the Intercontinental Exchange (ICE) dollar index and PredictIt suggests the likelihood of Biden winning is 73%. PredictIt is an online prediction website in New Zealand.

    The blue line in the figure represents the US dollar index, and the gray line represents PredictIt's predicted Biden's chances of winning

    Ruskin wrote, "A strong economy is beneficial for Biden, and it may also be beneficial for the US dollar through interest rate channels. However, an increase in inflation expectations due to economic strength will almost certainly have a negative impact on risky assets and Biden's chances of winning, although this may support the US dollar, especially against high-risk currencies."

    At the same time, the victory of former US President Trump may also be seen as favorable to the US dollar, although it is mainly due to geopolitical and trade frictions that are particularly unfavorable to the euro and have a smaller impact on the Mexican peso.

    The strategist added, "This view of 'default favoritism towards the US dollar' may be diluted, depending on the extent to which the Trump campaign team openly discusses the necessity of US dollar depreciation or attacks the independence of the Federal Reserve."

    Biden, currently 81 years old, and Trump, currently 77 years old, were convicted on 34 felony charges in a criminal lockdown trial in New York last week.

According to opinion polls, since the verdict, Trump's chances of winning the White House campaign seem to have declined. However, PredictIt still points out that the chances of the two candidates winning are almost equal, and strategists are still trying to figure out the potential impact of election results on the market.

    The US dollar index has risen 2.7% so far this year, and investors need to pay attention to the November US election, which is expected to affect the future trend of the US dollar.

    Daily chart of US dollar index

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