If Biden has a 11% points lead, why is the contest still considered too close to call?
The US citizen will go to the poll to vote and the winner of a state will get a group of people known as elector . To win, a presidential candidate will need go get 270 or more. Getting more than 50% of the vote does not mean getting to become the US president. Hilary Clinton will testify for you.
Polls are showing Biden is likely to win. But pollsters had got it wrong in the previous election and that is giving us the jitters. If you remember; Hilary Clinton was supposed to win but we had a US president called Donald Trump!
Beside the US president, there is also the House and Senate election. This could offer various scenarios and have different implications for the financial markets post election.
What is the implication for the US dollar?
The focus has been on COVID-19 relief stimulus measures. Post election, if Biden and the Democrat wins, a bigger relief stimulus can be expected. A bigger stimulus package is bad for the US dollar. More US dollar in the financial market is likely to weigh down the US dollar. A “Blue Wave” (no 4) could be the worse scenario for the US dollar with no Republican to object to the size of the stimulus.
What if the election does not provide a clear winner and Trump does not acknowledge his loss?
US dollar will be in demand for its safe haven status. (But we do not think it will happen).
Either way, one thing is for sure. Volatility will increase. Opportunities will be available for trading.
To be continued….. What is the implication for the equity market?