With just hours left until the polls close in the U.S. election, the campaign period has been challenging not only for Americans but for people around the world. The future of the Ukraine-Russia war, conflicts in Gaza and Lebanon, potential trade wars, the global economy, and the crypto markets are all closely tied to today’s election outcome. In this article, we will analyze the possible effects of the U.S. election on EURUSD, USDCNH, gold, stock markets, and bitcoin. While the focus will primarily be on short-term impacts, we will also discuss potential longer-term effects.
(Average Election Polls)
Election Odds
This presidential race is one of the closest in recent history. When Biden was initially the candidate, Trump held a clear lead, especially following the debates. Even if Biden had dropped out, Trump’s chances were seen as high. Harris, as part of the Biden administration, began her campaign with a disadvantage. However, she managed to build momentum, and after the Harris-Trump debate, she gained the upper hand. On the other hand, following a poor debate performance and an assassination attempt, Trump staged a comeback with a highly organized social media campaign, heavily influenced by Elon Musk.
In the end, the race is essentially a statistical tie, both nationwide and across most swing states. Markets appear to have mostly priced in a Trump win, although some of the “Trump trade” gains have faded. As it stands, Trump remains the dominant expectation. Because of this, a Harris win would likely cause more volatility than a Trump win.
Effects of Election Results
Kamala Harris is viewed by markets as more of a status quo candidate, expected to largely continue the current administration’s policies with some adjustments. Trump, on the other hand, represents a shift for both markets and geopolitics.
Tariffs: Trump plans to significantly raise tariffs to encourage U.S.-based manufacturing. While this strategy may yield limited long-term benefits, there are potential downsides that could outweigh the positives. Higher tariffs would increase the cost of imported goods, impacting efforts to control inflation. If these tariffs lead to trade wars, the dollar’s status as a reserve currency could be challenged. Trade partners like China, the United Kingdom, the Eurozone, and others would likely be negatively affected by a high-tariff policy. In an escalation scenario, global trade could suffer, and geopolitical risks could rise.
Tax Policy: Trump has proposed cutting corporate taxes, intending to offset the deficit through tariffs. However, according to many analysts, this may not be sufficient to fully cover the deficit, though it would likely have a positive impact on domestic production. Repealing green energy tax credits and focusing on fossil fuels could help curb inflation, but this effect may be offset by tariffs, a growing budget deficit, and rising income inequality. Harris, on the other hand, is expected to continue most of Biden’s policies, including raising taxes on corporations and the wealthy, which could reduce the deficit but may negatively impact production. Both Harris and Trump may face challenges passing their proposals through Congress, so the actual impact may be less than market expectations.
Geopolitics: If Harris wins, current foreign policies are likely to remain largely unchanged, with a potential shift in the Middle East. Harris may increase pressure on Israel to expedite the end of the conflict. Trump, however, openly supports Israel’s operations, meaning a Trump victory could heighten risks in the Middle East. Trump may also attempt to end the Russia-Ukraine conflict by leveraging his rapport with Putin, which could disadvantage Ukraine and, by extension, European allies.
EURUSD
EURUSD is expected to be negatively impacted by a potential Trump win, driven by the dollar index effect and potential tariffs. The uptrend from October 2023 is still in effect for EURUSD, which could be tested again. A Harris win might help EURUSD break through the 1.09–1.0915 barrier and attempt to reach 1.10. Over the medium term, however, our base case remains negative for EURUSD in either scenario.
USDCNH
USDCNH is likely to be negatively impacted by a Trump win. Increased tariffs would put pressure on the Chinese economy and reduce investment in China. A potential trade war between the two largest economies could have serious consequences for global trade. Additionally, geopolitical risks regarding Taiwan could increase alongside trade tensions. A Harris win may not be particularly positive for the yuan but would likely reduce the immediate effects of “Trump trade” in the short term. Key pivot points for the offshore yuan include 7.0850 and 7.16.
Gold
Gold is expected to benefit from a Trump victory. Higher tariffs, a rising budget deficit due to tax cuts, potential ongoing geopolitical risks, and trade wars would all be positive for gold prices. A Harris win, on the other hand, might counteract the Trump trade effects, potentially leading to a decline in gold prices. Gold is still advancing within an uptrend channel, with 2750 serving as a possible pivot point. While markets have likely priced in most of the potential effects of a Trump win, the price could push past 2800. If Harris wins, we may see the trend tested to the downside.
S&P 500
S&P 500 is difficult to predict. If the election process concludes without significant issues, some temporary relief could follow. As for the outcome, a Trump win may be positive due to anticipated tax cuts, though tariffs could weigh heavily on the index. A Harris win would likely be viewed as a status quo result, prompting markets to focus more on economic data. The S&P 500 recently broke a rising wedge formation and is now testing the 5725 support. If this support fails, downward pressure may intensify.
Bitcoin
Unlike the S&P 500, bitcoin has a clear favorite in the election: Trump. His support of the crypto markets is seen as a positive for bitcoin in the event of his win. If Harris wins, a short-term dip may occur, but over the medium term, bitcoin could still be expected to break through the 73664 resistance and begin a new bull run.
