Market Update: 10 November 2020
Despite the petulant tweets of the incumbent, the general perception is there is nothing Trump can do to prevent Joe Biden from assuming the Presidency. Joe Biden looks set to throw a Trump playbook right back at him with a series of Executive Orders when he takes office. These are expected to be largely focused on re-engaging the international community by re-adopting the Paris Climate Accord and WHO membership, however he must be careful to not marginalise the disenfranchised that elected Trump in 2016.
Markets have so far warmly re-acted to the prospect of a Biden Presidency and Republican Senate scenario. However, with the near term COVID situation escalating as America heads into the Winter months, if a Vaccine is not forthcoming in January, Biden may well be more willing to put the economy at risk to save lives, which indeed could contribute to market volatility. The market will also be a keen observer to see if some bipartisan agreement can be reached on the next stimulus package before the end of the year.
From a currency standpoint, we expect Biden’s willingness to re-engage on Foreign Policy to improve the global trade picture, and with Aussie Dollar viewed as a proxy for global trade this should prove supportive of the currency. Fed Monetary policy is also likely to undermine the value of the USD and support commodity prices (particularly precious metals) and this again should be AUD supportive. So a positive outlook across the board for the AUD. However, it will remain susceptible to sell off’s on fluctuating risk appetite in the weeks ahead.
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