Trump would be negative for the USD – Danske Bank

Thomas Harr, Global Head of FICC Research at Danske Bank, suggests that most US investors believe that Democratic candidate Hillary Clinton will become the next US president, with many noting that the first TV debate on 26 September marks the real kick-off of the election campaign.

Key Quotes

“Most investors think that a Donald Trump administration would trigger more aggressive fiscal easing, while a Clinton administration would be more status quo. Meanwhile, most think that Trump as president would find it easier than Clinton to pass his fiscal plans as the Republicans would then be likely to control both the House and the Senate, while the Democrats may not control the House even if Clinton wins. Clients think that the US election is non-tradable as of now. We believe that Trump would be negative for the USD compared with Clinton given Trump’s protectionist focus.

The USD: US investors are bullish on the USD on US outperformance and on monetary divergence. In particular, they believe the USD will strengthen versus the EUR. We also expect EUR/USD to fall near term on diverging monetary policy but we maintain our long-held view that the EUR will head higher over the medium term on the US-Eurozone current account differential and the undervaluation of the EUR.”