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With the first US presidential debate on Tuesday 29^th, we have officially entered the final phase of the 2020 presidential race, a race that is getting tighter than we realise.

Although most polls suggest a Biden win, how the final results will fall is still a mystery, and FX trading is reflecting this risk.

Since entering the final 60 days of the campaign, the US dollar basket has begun to pop and is trading in a strong upward channel. It has added as much as 300 points since the 60-day mark as seen in this chart.

There are five main issues of the campaign that are beginning to take shape, and these issues, when discussed by the candidates, are moving DXY.

These include:

1.      The Supreme Court – the reactions to which can been seen from the 21^st of September after the passing of Ruth Baber Grinberg.

2.      COVID-19 handling – this is a big issue for Trump’s re-election, over 60% of American are worried about the handling of the disease.

3.      Race and violence in the cities - Handling of this issue varies greatly between the two candidates and will spark fierce debate.

4.      The Economy and its recovery - polls suggest Americans see Trump as a better candidate here. If Biden wins, the initial reactions in FX and equities may be a slight negative from an economic reasoning.

5.      Validity of the Vote – this is building as one of the biggest risks in the market. The President continues to seed this idea to his supporter base – a contested election would put volatility front and centre and would ramp up risk-off trading.

All five of these topics will be discussed and dissected over the coming 5 weeks. The responses and future intensions of each candidate to the said topics will drive FX direction and momentum. Stay alert.

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