DB: первые мысли о результатах выборов и победы Трампа

While at the time of publication the result is not yet confirmed, polling forecasts suggest a Trump victory is likely. We are holding on to our long-standing short EUR/USD view given the asymmetric dollar positive risks we have been highlighting throughout this year and we move our year-end EUR/USD forecast down to 1.05. Whether this materializes is dependent on numerous uncertainties which we discuss below. We will be publishing a full portfolio review of our trades soon, followed by a medium-term forecast update for next year. Ahead of that, here are the key sign-posts we will be watching in assessing the path for the dollar ahead:

The outlook for fiscal policy globally. $ ⬆️ Whether Republicans control Congress is the key near-term uncertainty. A potential unified government under President Trump would have the greatest degree of freedom for fiscal policy and would likely be the most dollar bullish outcome as we highlighted in our pre-election table. But even without control of Congress, a Trump victory would be decidedly dollar bullish via the impact of tariffs and the dollar should especially outperform against high-beta currencies. Still, it is important to emphasize that fiscal uncertainties run beyond the US. We are awaiting for announcements from China’s NPC standing committee later on this week, while there is a material risk around an early German election on which there could be news as soon as today which could alter the fiscal policy outlook. We will be assessing fiscal developments carefully in coming weeks as this will be important in calibrating our dollar forecasts.

Appointment of key cabinet positions. The market will be focused on the relative balance of tariff versus tax policy changes in the event a new Trump administration is confirmed. The appointment of trade “hawks” at the Treasury will send a clear message of an emphasis on tariffs, while an appointment stemming from Wall Street may signal a more balanced approach in terms of priorities. Still, we would not want to over-emphasize this distinction as it is the Commerce Department that holds authority over tariff investigations, and a “hawkish” appointment in Commerce, even with a more mainstream Treasury Secretary, could still be equated with an aggressive policy on tariffs.

Sequencing and magnitude of economic policy change. The market will be most sensitive to any communication around the timing to a change of tariff policy, especially as this is likely not bound by Congressional timelines and subject to executive authority. The bigger the emphasis on tax cuts and deregulation in terms of near-term agenda, the more positive this is likely to be for risk assets, while the opposite will be the case for tariffs. The broad dollar should do well in both scenarios, but depending on the emphasis, outperformance would be greatest in the low-yielders (fiscal policy to boost US growth) or the high-yielders and EM (policy emphasizing protectionism). For EUR/USD, market repricing on the back of assertive rhetoric on tariffs is likely to be more front-loaded compared with an emphasis on fiscal policy, as it will likely lead to a more immediately dovish ECB response. The risks of a 50bps cut in December are clearly rising.

Geopolitical initiatives. If Trump is confirmed as President-elect, he has expressly indicated he will seek a quick resolution to the Ukrainian conflict even ahead of a potential inauguration. The market will be sensitive to announcements around diplomatic initiatives and also any “peace plans” being publicized or leaked to the press. This may act as some counter-weight to the dollar bullish expectations created in anticipation of tariffs and easier fiscal policy. On the flipside, it is not clear that the near-term implications of a Trump win in the Middle East would be towards de-escalation. Given the complexity of the issues at hand, we would caution that unless there are signs of genuine momentum in any initiatives, this is likely to not be the most relevant market driver.