This is how much US dollar will rally if Trump wins

Citi analysts said in a note this week that the US election this year is positive for the US dollar.

According to the bank, the November US elections are USD-positive, driven by Trump policies on trade and the potential for increased tax cuts, especially under a "red wave" scenario, which would see Trump win the White House and Republicans win both chambers of Congress.

Looking back, Citi explained that historically, US presidential elections have had little FX impact, although the US Dollar Index (DXY) has seen marginal upside on a Republican challenger winning.

"However, Trump elections have been unique," they note. "In both 2016 and 2020, the USD reaction after the fact was a move of around 5%: the USD rallied around 5% after the surprise Trump election win in 2016, and it lost around 5% in 2020 as the market unwound the risk of another Trump victory."

As a result, the bank suspects +5% is the right amount of potential USD strength to attribute to a Trump victory with a red wave.

Even so, much like 2020, the firm expects markets will already have this largely priced in by election night, and Citi expects "the high in the USD—potentially for the year— could very well be seen right around the election."

By Sam Boughedda

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