Election day is closing in and investors are betting on the U.S. dollar
UBS Wealth Management senior vice president Brenda OConnor Juanas and Strategic Wealth Partners Mark Tepper look ahead to the elections impact on markets and notable earnings out this week.
Demand for the U.S. dollar has surged this month as Election Day draws near and investors position themselves for its potential outcomes as well as the Federal Reserve being likely to continue to lower interest rates in the coming months.
Through Monday, the dollar rose for 14 of the past 16 trading sessions and has been up for three straight weeks amid economic data showing continued strength in the labor market even as inflation has cooled.
A report by J.P. Morgan foreign exchange market analysts that was published Monday said that there has been «strong» demand for the dollar, which «surged last week as the election has come to the fore.»
The analysts noted that there was particularly strong demand for U.S. dollar options against the euro, Mexican peso, Australian dollar and the Singaporean dollar. They explained that those currencies appear to be election hedges – with Australian and Singaporean dollars exposed to greater levels of trade with China, while the euro carries exposure to trade conflict and the Mexican peso is a historical election hedge.
THE US DOLLAR'S DEMISE HAS BEEN EXAGGERATED, REPORT FINDS
Demand for the U.S. dollar is rising as traders hedge their bets ahead of the eleciton. (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)
«There's still ample space to add to USD longs both ahead of the election, and more broadly if U.S. data continues to pressure Fed easing operations,» the analysts wrote.
A report from J.P. Morgan analysts on Friday explained that the dollar recovered from a 5% sell-off
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