The market initially ran with the idea that the election was going to be plain sailing for the Democrats and started to price in expectations of a Blue Wave outcome. The reflationary pricing saw US 10-year yields rise and the dollar weaken, with general risk sentiment boosted across markets. However, Florida turned red throughout the night, with Texas shortly following suit. The signs were there that the night was going to be a lot longer and less predictable than initially thought, leading to a rebound in the dollar and a flattening of the US yield curve. Even to date, markets don’t have complete certainty of the result, but two avenues stand out as the most probable. That is, either a Biden presidency with a GOP Senate or a contested election.
The FX Analysis department at Monex Europe worked hard through the night, and spoke with media outlets as the probable scenarios evolved over the last two days and market volatility remained elevated.
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