2020 US Elections: Fears of a contested election to lift the dollar

National polls have been showing that President Trump has narrowed his deficit while surveys in the critical battleground states of Pennsylvania and Florida are also tentatively showing Biden has peaked. The chances of a contested election are rising and could lead to a stock sell-off and a dollar rise, Yohay Elan, an Analyst at FXStreet, reports. 

See:

US Elections: Biden win to trigger profit-taking on equities and revert USD weakness – Nordea

US Elections: President Trump victory with a split Congress, the most positive outcome for financial markets – HSBC

US Elections: Blue Wave to extend USD decline and equities rally – Westpac

Key quotes

“On the national level, the New York Times/Siena College poll showed Biden leading by nine points – the first post-debate high-quality poll to show only a single-digit lead for the former Vice President.

“If Biden wins Florida, it is hard to see Trump winning. However, if the president clings to his new home state, the focus would shift to Michigan, Wisconsin and most importantly Pennsylvania. The president's victory in 2016 was based on fewer than 100,000 votes in his favor in these three states. The Keystone state is also showing signs that Biden's support has peaked.”

“In case the incumbent wins Florida, the battle would go up north. There, election-day voting could initially show Republicans in the lead, before the mail-in ballots are counted. Trump would declare victory and then cry foul as remote voting would show Biden leading. Having both candidates declare victory would cause significant political instability and uncertainty – that markets despise. While GOP leaders could eventually push Trump out, long weeks of tension – and perhaps violence on the streets – could weigh on sentiment and boost the safe-haven dollar.”