Synopsis:

Credit Agricole highlights the November 5th US election as highly consequential for USD, with a Trump win likely to strengthen the currency due to his potential trade policies and possible Congressional support. By contrast, a Harris win could see limited USD losses, as the dollar’s rate advantage provides ongoing support.

Key Points:

• Trade Policy Divergence: Trump and Harris hold contrasting views on US trade policy, which could impact USD direction based on election outcomes.
• Fiscal Policy Dynamics: Trump could gain from a supportive ‘red wave’ Congress, while Harris may face challenges advancing her domestic policies with a divided legislature.
• USD Rate Advantage: The USD currently has a strong rate differential compared to G10 currencies, more pronounced than in prior election cycles.
• Post-Election Impact: A Trump victory may drive USD closer to 2024 highs, while a Harris win is expected to result in only modest USD weakness.

Conclusion:

Credit Agricole sees potential USD gains on a Trump victory, bolstered by supportive fiscal policies and trade plans, while a Harris win would likely bring limited USD downside. The dollar’s rate appeal is expected to sustain its relative strength, reinforcing the currency’s resilience regardless of the election outcome.