TD Research summarizes its expectations for FX market reaction to today's US elections.
"It's finally here. Despite all the other forces, the US election will likely suck away all the oxygen for the coming sessions. A low-drama event would be ideal this evening but it's always best to plan for the worst and hope for the best. Market consensus currently expects a Blue Wave, which on our estimates is worth about 2% USD downside," TD notes.
"That said, we think most other possible outcomes side with a USD snapback, where a Trump victory invites a 2% rally. That scenario summons a resurgence of US risk assets versus the rest of the world. It's also particularly bad for Asian assets, given MSCI China sits as one of the best performing assets YTD.
A split government is neutral for the broad USD, reflecting the push and pull of opposing forces: risk-off and less fiscal," TD adds.