By eFXdata — Oct 29 - 04:30 PM
Synopsis:
Danske Bank notes a strong correlation between EUR/USD and US election betting odds, with substantial movement likely depending on the outcome. A Trump win would likely drive EUR/USD lower, while a Harris victory could offer the euro temporary relief, although eurozone fundamentals remain a drag.
Key Points:
- Betting markets have shown EUR/USD’s sensitivity to shifts in US election probabilities, with recent swings aligning with changes in candidates' odds.
- A Trump victory, coupled with negative sentiment in the eurozone, could create a highly bearish scenario for EUR/USD, potentially driving a two-standard deviation move lower.
- A Harris win could alleviate EUR/USD pressure as fears of new US import tariffs ease, though ongoing ECB rate cut expectations would limit EUR upside.
- Regardless of the outcome, with betting markets at a 60% probability split, Danske expects a pronounced reaction in EUR/USD.
Conclusion:
Danske Bank anticipates a volatile EUR/USD response to the US election, with a Trump win potentially pushing the pair lower amidst eurozone concerns, while a Harris victory may offer temporary euro support. The alignment of political and economic factors suggests a multifigure move is plausible, underscoring EUR/USD’s sensitivity to the election’s outcome.
Source:
Danske Research/Market Commentary