The recent trend of the dollar indicates that former Vice President Biden defeated President Trump in the upcoming election, but many things can change before November 3.
Since the close on July 31, the dollar index, which tracks the exchange rate of the dollar against a basket of dollars, has risen 0.9%.
A weaker U.S. dollar in the first three months of the election usually benefits the incumbent party, and a stronger U.S. dollar is good news for challenging parties. Ryan Detrick, chief market strategist at LPL Financial, said that the index has correctly predicted seven of the eight general election winners after using the method.
Detrick wrote: “As we saw in March, when trouble hits, the dollar tends to be good because investors flock to the safety of the world’s reserve currency.” “When the situation is calm, the dollar tends to depreciate. This is good for high-risk assets.”
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In the context of global shortages, the US dollar index soared 10% from March 9 to March 20 due to government orders to lock the market to slow the spread of COVID-19. Since then, the index has fallen by 8.2% because the global economy has slowly recovered from the worst downturn after World War II.
However, due to the loss of economic momentum, the stagnation of stimulus talks, the surge of new COVID-19 infections in Europe and the intensified tensions between the United States and China, the US dollar exchange rate rose by 2.65% in September and broke the resistance level of 94.40 on Thursday.
Marc Chandler, chief market strategist at Bannockburn Global Forex, said that this breakthrough opened the door for further near-term trends and “towards 96.00”.
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According to LPL’s analysis, the further strengthening of the dollar seems to be bad news for Trump.
Although the performance of the US dollar index is only an indicator of how the election is conducted, another market signal is also detrimental to the president.
Similar indicators show that a rise in the stock market three months before a general election usually indicates the victory of the incumbent party, while a fall indicates a change in control.
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Data from LPL Financial show that since 1984, this indicator is the perfect choice for nine out of nine presidents and correctly predicted 87% of presidential elections.
The S&P 500 index fell 1.05% from August 3 to Wednesday, implying Biden’s victory.
With more than five weeks to go before the election, the two measures still have time to swing in the direction of Trump.