As of this writing, the U.S. presidential election is less than two weeks away, and some states have already begun early voting. Since Biden announced his withdrawal, Kamala Harris has taken up the Democratic Party’s challenge against Trump from the Republican side. While polls initially showed a lead for Harris, the gap has narrowed significantly as election day approaches, with a tight race in play. Many analysts suggest Trump holds a clear advantage, with recent betting markets showing large wagers on a Trump victory, and financial markets already preparing for a potential Republican return to power.

Kamala Harris, who has served as Vice President, has limited achievements to show and lacks strong on-the-spot responses. Trump, on the other hand, has a strong base of dedicated supporters, greater personal appeal than Harris, and support from figures like Elon Musk, who has contributed both money and backing. Given the structure of the U.S. electoral system, Trump stands a solid chance of securing the electoral votes needed to regain the presidency. His core slogan, "Make America Great Again!," focuses on strict immigration policies, trade protectionism, tax cuts favoring the wealthy, increased tariffs, pressing allies for more financial contributions, and an unsupportive stance on environmental issues. Should Trump win a second term, it would likely add further uncertainty to the already complex global landscape, straining relations between the U.S. and its allies. Meanwhile, the impact of a Trump presidency on ongoing conflicts, such as the Russia-Ukraine and Middle East situations, remains to be seen, as well as China’s potential response to an arguably more unpredictable or challenging opponent.

The U.S. Dollar Index (DXY) began a strong rally in late September after reaching 100, now climbing back above 104. This rebound largely stems from the market’s previous overestimation of the Federal Reserve's intent to cut interest rates. Multiple Fed officials, including Chair Powell, have indicated that there’s no strong need for further drastic rate cuts, reinforced by stable economic and inflation data aligning with this policy stance. In contrast, other major economies have shown a more aggressive approach toward rate cuts. Recently, the Reserve Bank of New Zealand and the Bank of Canada both implemented 0.5% rate cuts, with Canada accumulating a total reduction of 1.25%. The European Central Bank has reduced rates three times since June, totaling 0.75%, and the Bank of England’s governor has hinted at potential aggressive cuts. Additionally, Japan’s central bank, which had been expected to continue raising rates, alongside the new Prime Minister Shigeru Ishiba, unexpectedly indicated a cautious stance, which has helped fuel a 4% rise in the dollar throughout October.

It’s worth noting that the Federal Reserve’s cautious stance won’t prevent the start of a U.S. rate-cutting cycle. Regardless of who wins the election, they will face the challenge of America’s high debt levels, with expectations for rate cuts likely to rise if Trump takes office. The Dollar Index has fluctuated within the 100–106 range for nearly two years, so buying USD at current levels is not recommended. A wait-and-see approach post-election would be more prudent.

Patrick Law

Chief Operating Officer of Hantec Group