Goldman Sachs says odds of ‘blue wave’ for Democrats are improving, downside for US dollar
Investors are expected to sell the dollar as odds improve for a “blue wave” election – a victory for Democrats in the House, Senate and Presidential Election – Goldman Sachs economists said in a statement. recent note.
Two events could cause the dollar to fall to its 2018 lows, Goldman strategists led by Zach Pandl said: a blue wave and progress on a vaccine, Business intern reported.
“While there are uncertainties around the two, the risks are skewed toward dollar weakness, and we see relatively low odds of the most positive outcome for the dollar – a victory for Mr. Trump, combined with a significant delay. vaccine. “
The odds of a blue wave have risen to over 60%, based on Democrat Joe Biden’s growing lead over President Donald Trump in the polls, Goldman said.
With less than three weeks to go before election day, Biden has a double-digit lead over Trump in most national polls and an advantage in most major swing states, CNBC reported. Biden leads Trump 54% to 43% among likely voters, latest says NPR/ PBS NewsHour / Marist survey.
It’s a reminder of that time four years ago, when Hillary Clinton was leading against Trump. Trump proved the polls wrong at the time.
Analysts didn’t always think Biden and a Blue Wave would be good for the market, but they are now, New York Times reported.
Initially, analysts focused on his plan to raise taxes. Morgan Stanley analysts warned in June that “deficit spending and redistribution” as part of a Democratic sweep could weaken business confidence, investment and jobs.
Then stimulus talks collapsed, coronavirus cases rose, and analysts began to discuss the possibility of democratic control in a different way.
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“Trump’s response to the coronavirus pandemic, the recession, none of which is about to end, and the resurgence of the Black Lives Matter movement, which Trump has denounced, have driven millions to take up politics more seriously in order to keep Trump out of a second term, ” Black company reported.
The U.S. dollar index, which tracks the strength of the dollar against six other major currencies, has fell about 5 percent over the past six months to about 5.3% above where it was trading in January 2018.
Goldman recommended two dollar short trades in the fourth quarter as the risks were negative for the dollar. “To short a currency is to sell it with the intention of buying it back later at a lower price, thus betting on its depreciation; going long means the opposite, ”CNBC reported:
“The Pandl team recommended taking a long position in a volume-weighted basket of the Mexican peso, South African rand and Indian rupee, and a separate, equally-weighted basket of Canadian dollars, Australian dollars and ‘euros. Volume weighting is a measure of the average price of a security over a period of time.