The calm before the storm for currencies?

Currency markets are ending the week broadly unchanged, on net, leaving the US dollar near a three-month high ahead of next week’s pivotal election. With polls continuing to point to a very tight race in the swing states and betting markets shifting back a little towards Harris over recent days, we think there is ample scope for a sizeable repricing across markets once the election outcome becomes clear. As we set out in our election preview Focus, we think the near-term effect of a Trump win would be a stronger dollar, especially if accompanied by Republican control of Congress, while a Harris win would lead to a weaker greenback. That would be in line with what happened immediately after the last two US elections. Whatever the outcome, next week is likely to prove volatile, not least because the election will be followed by policy announcements from the Fed and several other central banks, as well as potentially news on China’s fiscal stimulus plans.