The outcome of the US election was again a surprise as the “Blue Wave” was not as strong as expected. Still, markets have responded favorably, hoping that a more centrist government may emerge. The USD has weakened in response. Fundamentally, we remain USD bearish, yet prevailing uncertainties including the new surge in Covid-19 cases could swing sentiment either way in the short-term.
Economy and Interest Rates
Global economic activity recovered strongly in the third quarter but momentum is now fading as the recovery is moving from the re-opening rebound to a second more cyclical phase, which is still marked by significant corporate balance sheet and labor market distortions, while a new round of Corona infections is undermining mobility and activity, especially in Europe.
Currency markets were largely range-bound in October and running into the US election. The main exception was the TRY, which fell nearly 10%. Among major currencies, the SEK was one of the best performers, while the CNY stood out among emerging market currencies.
Going into more detail: Based on our proprietary analytical framework to take scalable exchange rate positions we are taking a close look on individual currency pairs.