January 27, 2023

Biden presidential election win boosts markets

LQDFXperts Weekly Highlights: Biden presidential election win boosts markets

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Markets rally following Biden presidential election win. The Democratic candidate crossed the threshold of the 270 electoral college votes required for victory.  

However, President Donald Trump does not plan to concede anytime soon. In any case, the Democratic candidate’s election victory was already largely priced in by markets.

Investors had been trading with the view of a Biden presidency and a Republican-controlled U.S. Senate since last week. But the Democratic candidate’s projected victory on Saturday gave more fuel to the move.

Investors focus on Biden’s ability to expand fiscal stimulus and measures to reduce the spread of COVID-19. The United States saw a record number of new coronavirus infections last week.

A fiscal stimulus plan is still possible despite a divided government, analysts said, though a larger package is less likely. Further, investors expect a calmer White House which may boost world commerce and that monetary policy will remain easy.

Traders are also wary of fresh lockdowns as coronavirus cases surge. The global tally of infections topped 50 million on Sunday as cases in the United States surpassed 10 million.

Central banks remain committed to an accommodative policy, with the BoE and the RBA easing monetary policy last week. The Bank of England held rates at 0.10% while The Reserve Bank of Australia trimmed rates from 0.25% to 0.10%.

Pfizer said its experimental vaccine was more than 90% effective in preventing COVID-19 based on initial data from a large study.

Investor focus will also be on Brexit as trade negotiations coming to a head with the EU summit on Nov. 15. Britain said it was open to a “sensible” compromise on fishing.

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Biden presidential election win boosts markets- PMIs and Rate Decisions ahead

Investors are prepared for short-term trading turmoil and major long-term policy shifts, on the eve of the US Election 2020. Besides the U.S. presidential election, this week is filled with economic data, including PMI data from the United States, euro zone and elsewhere, as well as U.S. non-farm payrolls and Chinese trade. Also, the BoE and RBA will announce their rate decisions.

  • Later in the day (Monday 09.11.2020) the Bank of England’s chief economist will give a speech. The speech is on ‘The economic impact of coronavirus and long term implications for the UK’.
  • Traders will be watching for the UK Employment Report on Tuesday (10.11).
  • Traders will be also looking for the RBA Rate Decision on Tuesday. The RBA has pegged the Cash Rate at 0.25% since March but has sent broad hints to the markets that it plans to trim rates.
  • On Wednesday (12.11), the BoE Rate Decision. Investors are expecting more of the same at the BoE policy meeting. Members are expected to hold the Official Bank Rate at 0.10% and maintain QE at GBP 745 billion pounds.
  • Europe’s fiscal and monetary responses to a second wave of coronavirus infections will be in focus when ECB President Christine Lagarde speaks on Thursday (13.11).

Follow this week’s economic calendar.

LQDFXperts – US election triggered volatility

Expectations of fewer regulatory reforms and more monetary stimulus under U.S. President-elect Joe Biden supported risk appetite. It was a week marked by exceptional volatility, with the US dollar showing broad losses against the G-10 currencies.

EUR/USD continues to show strong volatility and gained 1.96% last week. The euro had an excellent week, but this was a result of US broad weakness rather than strength in the euro. The U.S. dollar slipped about 1.3% last week, its biggest drop since March. The euro climbed 1.9% last week, coming closer to 1.19. The single currency has risen sharply this week on the dollar’s weakness. The common currency has also benefited from the news of the European Union inching closer to a budget deal.

USD/JPY dropped sharply last week, as the US election drama resulted in broad losses for the US dollar. The pair fell to a weekly low of 103.17, its lowest level since early February. The Japanese economy is limping along, and strong numbers from the US could push the dollar higher.

AUD/USD showed sharp gains last week, climbing 3.3% as trade-exposed currencies got a fillip from Biden’s predicted victory. This was the Aussie’s best week since June, taking full advantage of the US election. The Australian dollar’s momentum could continue.

The Canadian dollar had an outstanding week, climbing 1.99%. This was its best weekly performance since June. With the US election results finally in, USD/CAD will likely settle down after last week’s huge downward move.

PLEASE NOTE The information above is not investment advice.

Sources: Reuters, CNBC, BBC, The Guardian