On Wednesday morning the US presidential race is still too close to call. Some of the most relevant swing states have not fully counted the ballots so far.
The list of these states is long and consists of Pennsylvania, Wisconsin, Michigan, North Carolina and Georgia. Trump is ahead in all of them but has not been announced as a winner due to the high number of mail ballots, which should favour Biden and prevent from tipping Trump as a victor prematurely.
A Trump re-election becomes a central scenario
The Democratic Party has secured the House, but the outcome of the Presidential election and the Senate election can still go both ways. The chance of a Democratic sweep has abruptly faded, and the possibility of Donald Trump’s victory arises as a new central scenario. However, it might be all the way until Friday, before a result is finally announced.
Markets wrong-footed again
Since the beginning of the week market participants have been positioning themselves for a clean democratic sweep and a clear outcome. The greenback (the US dollar) depreciated, equities rose sharply to recover the October’s sell-off partially. A landslide Biden’s win was perceived as a threat to the US dollar’s strength due to the inevitability of launching a huge fiscal package in such a scenario. Similarly to the 2016 elections, polls have failed to indicate the winner. This time, due to the recent risk rout and the fact that investors bear in mind the shock of the previous election, positioning has been much lighter, and therefore, a knee-jerk reaction was avoided. Equity futures try to hold to Tuesday’s gains and the greenback appreciate. So far, the EUR/USD pair has failed to erode the 1.16 boundary. The AUD, CAD and NZD are the most vulnerable G-10 currencies, and we could see the EM space weakness as well.