View of the Week: If 2024 is anything like 2016
Repeats with no changes
July 16 (Reuters) -Markets are seeing an increased probability of a Trump presidency, with bookmakers such as PredictIt indicating a comfortable margin for the Republican over incumbent Joe Biden. However, despite odds moving in favor of Donald Trump winning the presidential election, reaction in the FX market has been tepid.
A reason behind this may lie in the fact that there is some distance between now and the election. For FX markets, the general consensus is that a Trump presidency would lead to a higher USD via tariff risks and fiscal policy – another push for tax cuts – which would likely have implications for Fed policy.
The chart below shows the performance of the major currencies against the dollar in the following three-months after the 2016 election, whereby both the Mexican peso and Japanese yen were initially the worst performers.
Given the increased odds of a Trump presidency, both currencies could be seen as vulnerable to setbacks. Another expression of a Trump trade in light of a likely step up in protectionism might be USD/CNH higher.
For more click on FXBUZ
FX impact Trump https://tmsnrt.rs/469DyuR
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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