EUR/USD Forecast: How three US election outcomes (and a contested result) could rock the dollar

  • EUR/USD may ride on a blue wave and surge.
  • A victory for Biden with a Republican-controlled Senate could trigger a moderate downfall.
  • Euro/dollar has room to rise if Trump is re-elected. 
  • The nightmare scenario is that the results of the elections are contested. 

The second wave of coronavirus is locking the euro to the downside – but traders have little time to consider the implications of the virus as the all-important US elections are set to rock markets.

President Donald Trump is trailing rival Joe Biden in the race to the White House. However, the race remains open and the reaction depends on two other factors – the Senate, and how quickly the event is settled. 

With covid climbing on both sides of the Atlantic, the immediate question for markets is the size of the stimulus bill. Democrats and Republicans seemed to zero in on a massive $2 trillion package but eventually failed to agree and pass it.

Each time headlines suggested an imminent accord, the safe-haven dollar retreated and EUR/USD advanced. When prospects diminished, the greenback received fresh demands, sending the world's most popular pair down. While the recent decline is mostly attributed to new European lockdowns, the lack of relief from Washington is also a downer for euro/dollar. 

How will the elections impact the pair? Here are four scenarios:

1) Surfing the blue wave

According to FiveThirtyEight, Biden has an 88% chance of becoming America's 46th president. The model is based on state polls – which matter more than the national mood.

The former Vice-President's lead is robust that he could overcome a 2016-style error in surveys that sent the current president to the White House. According to the New York Times' Upshot, Biden would win 290 electoral votes in case the polls are underestimating Trump like four years ago.

Source: NYT

In such a scenario, Dems would also win the Senate and the House, allowing them full control of the government. They could swiftly pass a generous stimulus bill, either worth around $2 trillion like they were close to signing off with the GOP, or even $3.4 trillion they originally passed in May.

In both scenarios, there is a significant downside for the dollar and upside for EUR/USD. It would also provide relief from the other scenarios that markets fear.

2) President Biden, Republican Senate

The battle for the Senate is considerably closer than the presidency. According to FiveThirtyEight, the center-left party has a 74% chance of flipping the upper chamber, close to what the site gave  Hillary Clinton back in 2016. With several tight races, there is room for the GOP to cling onto the Senate.

Source: FiveThirtyEight

In opposition, the Republicans could play hardball and refuse to pass a meaningful package, compromising on $1 trillion they suggested in September or even lower. Moreover, the stalemate in Congress would also weigh on markets.

Euro/dollar has room to fall on concerns that the world's largest economy is not doing enough to rise from the crisis – nor lift the rest of the world.

3) Trump wins, EUR/USD rises

Everybody remembers 2016 – the hopeful Trump base, shocked Democrats, and the rest of the world. While over 70 million have voted a week before the elections, there may still be last-minute movement in favor of the incumbent – or the polls may be skewed to the same direction again.

More 2020 US Election: Polling, history and the submerged Trump vote

According to RealClearPolitics, the gap on the national level is 7.1%, which is not insurmountable:

Source: RCP

In case Trump pulls off another electoral college victory, Republicans are also likely to cling onto the Senate. While Majority Leader Mitch McConnel and his colleagues were reluctant to support the president's efforts before the elections, a fresh mandate could empower Trump to push for a larger package. 

In this case, EUR/USD would move higher, albeit not massively.

4) Nightmare scenario – EUR/USD crashes

All the previous scenarios refer to the final outcome. What if there is no agreed verdict? The scenario of a contested election is far from theoretical as Trump refused to commit to accepting the results. He continuously made unsubstantiated claims of fraud and his party tried to limit mail-in ballots, which Democrats rely on more than Republicans. 

In case the president wins the perennial swing state of Florida – which is already counting early voting – it would likely go down to the wire in Pennsylvania. The governor of the Keystone State is a Democrat while the legislature is controlled by Republicans.

Who makes the final ruling on rejected ballots, how long the count lasts or calling a recount? These are some of the questions possible in one state. Legal battles could erupt over additional issues in other states as well. Moreover, both Trump and Biden could claim victory. 

Eventually, Americans will agree on an outcome, but a protracted process – and potential violence on the streets – could be detrimental to markets. The safe-haven dollar could surge, sinking EUR/USD. 


The US elections are critical to the next moves in EUR/USD. The four different scenarios provide unique paths for the currency pair, with high-volatility outcomes looking more likely. 

See 2020 Elections: Seven reasons why this is not 2016, time to focus on the Senate

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended Content

Recommended Content

Editors’ Picks

AUD/USD risks a deeper drop in the short term

AUD/USD risks a deeper drop in the short term

AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.


EUR/USD leaves the door open to a decline to 1.0600

EUR/USD leaves the door open to a decline to 1.0600

A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.


Gold price edges higher on risk-off mood hawkish Fed signals

Gold price edges higher on risk-off mood hawkish Fed signals

Gold prices advanced late in the North American session on Thursday, underpinned by heightened geopolitical risks involving Iran and Israel. Federal Reserve officials delivered hawkish messages, triggering a jump in US Treasury yields, which boosted the Greenback.

Gold News

Bitcoin Price Outlook: All eyes on BTC as CNN calls halving the ‘World Cup for Bitcoin’

Bitcoin Price Outlook: All eyes on BTC as CNN calls halving the ‘World Cup for Bitcoin’

Bitcoin price remains the focus of traders and investors ahead of the halving, which is an important event expected to kick off the next bull market. Amid conflicting forecasts from analysts, an international media site has lauded the halving and what it means for the industry.   

Read more

Is the Biden administration trying to destroy the Dollar?

Is the Biden administration trying to destroy the Dollar?

Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.

Read more