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Oct 30 - 02:55 PM

HSBC: EUR/USD Likely to See Short-Lived Rally on Harris Win, Followed by Gradual Decline

By eFXdata  —  Oct 30 - 12:45 PM

Synopsis:

HSBC anticipates a knee-jerk rally in EUR/USD if Kamala Harris wins the US election, driven by initial USD weakness. However, they expect this rally to be temporary, with the pair likely resuming a downward trajectory as monetary policy differences reassert influence.

Key Points:

  • A Harris victory is likely to cause a short-term EUR/USD rally, reflecting initial market relief and USD retreat.
  • The rally may lack durability, as a Harris presidency, especially with a divided Congress, would be seen as maintaining the status quo.
  • HSBC expects that after the initial rally, factors like relative growth and monetary policy divergence will favor the USD, resuming downward pressure on EUR/USD.
  • Following October’s sharp drop in EUR/USD, any post-election decline would likely be gradual rather than steep.

Conclusion:

HSBC foresees a temporary boost in EUR/USD on a Harris win, but with limited long-term impact. After an initial spike, they expect relative monetary policies and growth outlooks to favor the USD, leading to a slow and steady decline in EUR/USD rather than an abrupt fall.

Source:
HSBC Research/Market Commentary

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