Today is the night! (Daily analysis 3.11.2020)

Risk appetite has emerged just ahead of the election day. The US dollar depreciates. The EUR/USD pair recovers towards 1.17. The Australian dollar underperforms after further easing delivered by the monetary authorities.

Joe Biden ends the presidential campaign leading the polls 50.7% to 44%. This is a broader margin compared to one of Hillary Clinton's in 2016, yet still not enough to rule out the re-election of Donald Trump or his efforts to contest the outcome.

Risk markets hope for the Biden win

The potential for delayed results depends on how close the result is, especially in early reporting swing states. Market participants will be focused on key Senate races as well, as it will seal the fate of a fiscal stimulus. The scale and timing of a COVID-19 relief package are crucial factors for the US currency. A clean Democratic sweep is a central scenario. A relief rally would push equity markets higher and make the dollar tumble.

In the US Electoral College system the candidate who reaches 270 votes as the first one wins the presidency. The most up-to-date simulations indicate that Biden is likely to take 226 votes almost for granted, while Trump can expect only 125 "safe" votes. The toss-up states (swing states), which constitute for 197 are decisive for the final outcome. Florida is the most crucial of all, as since 1992 it has been essential to secure its' 27 electoral votes to win. If Trump loses there, his chances for re-election will fall sharply. Other significant battlegrounds to watch are traditional Democrats strongholds, where Clinton unexpectedly lost in 2016 (Pennsylvania, Michigan, Wisconsin) as well as Arizona and North Carolina.

A threat of a delayed result

In 2016, the results were known before 9 am (CET), as securing Wisconsin's 10 votes shifted Trump above the 270 mark. Historically, the presidential election was usually called a couple of hours earlier. This time it might be a different story as the impact of the mail ballot is a huge unknown. The result could be delayed depending on how close the presidential race is.

Early voting totals exceed 95 million what accounts for nearly 70% of all votes from the 2016 election. Almost half of the states (including key swing states North Carolina, Michigan and Pennsylvania) allow for late arrival of ballots. Therefore, we will only know who the next president is on the morning of November 4th (CET) in the case of a blowout democratic sweep, where the outcome can be decided without the need of taking into account all the ballots from states which require only postmarking them on the election day.