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Traders Look for Post-Election Reset

Justin Carrigan and Benjamin Purvis
·3 min read

(Bloomberg) -- After a week in which markets barely had time to draw breath as Joe Biden inched toward victory in the U.S. presidential election, traders have begun to dive right back in with the euro and Australian dollar among currencies climbing versus the greenback.

The Democratic challenger’s win over President Donald Trump was declared by media networks on the weekend and the broad verdict is that a Biden administration will be a positive for riskier assets. This is in part because more predictable policies may help buoy global trade. And while the possibility of a divided Congress puts limits on the amount of economic stimulus that will be implemented, some form of package is also on investors’ radar.

Biden “might struggle to get the $3 trillion wanted by Democrats, but some package is likely,” Nigel Green, the Zurich-based chief executive officer and founder of financial-advisory firm deVere Group, said ahead of the market open. “This will buoy the markets and would have investors think about a broader-based economic recovery. As the world’s largest economy, sustainable, long-term growth in the U.S. will have a positive ripple effect for the world economy.”

The euro and the Australian dollar extended gains from last week versus the greenback in early Asia-Pacific trading, although the scale of moves was relatively muted as Biden had already appeared to be on the cusp of victory before New York trading ended Friday. The yen, often viewed as a haven was marginally weaker against the U.S. currency in early trade.

Biden at the weekend called on Americans to put aside their divisions in a victory speech that promised swift action against the coronavirus pandemic and an orderly transfer of power following the election. Still, the 46th president won’t take office until Jan. 20 and there remains the potential for disruption before then. Trump has vowed to challenge the election outcome in several states, alleging without evidence that there was widespread fraud in the vote.

“The dollar should structurally remain weaker, and this means that world currencies will still look to strengthen in time,” Jameel Ahmad, the London-based director of investment strategy at German fintech group NAGA, said ahead of the market opening. However, global stocks “are not likely to continue last week’s extravagant surge as a result of contested election fears. This is an unknown hazard and all of us are anxious to see it play out domestically in the U.S. because the current administration do not look like they will accept the 2020 presidential race without a fight.”

While currency markets have begun trading, U.S. stock and Treasury futures aren’t slated to begin until around 6 p.m. New York time.

Last week was a tumultuous one for markets. Stocks soared, Treasuries were whipsawed and the dollar slid. Assets were affected not only by incoming results from America’s Nov. 3 vote, but also by the Federal Reserve’s latest policy decision and the monthly U.S. jobs report, which came in stronger than expected.

Markets rallied Sunday in the Middle East, the first to trade after Biden’s victory. Stocks in Dubai posted their biggest three-day rally since August. Saudi Arabia extended the longest streak of gains since Oct. 13. The Kuwait gauge closed above its 50-day moving average, while Oman stocks had the first back-to-back advance in a month. Israel’s main index rose to a two-month high.

(Updates with currency market open)

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