As the US presidential elections kick off, the EUR/USD currency pair has surged to near the key resistance level of 1.0900, reflecting the heightened market anticipation surrounding the results. With a tightly contested race between Democratic nominee Kamala Harris and former President Donald Trump, traders are watching closely as the election could significantly impact both the Euro and the US Dollar.
A Neck-and-Neck Race Fuels Market Dynamics
Recent polling indicates a nail-biting contest, with Harris gaining a slight edge in key battleground states. According to the latest Des Moines Register/Mediacom Poll, Harris has a three-point lead in Iowa—a state historically favoring Republicans. This shift in momentum has led to a recalibration of expectations, with analysts suggesting that a Harris victory could alter the trajectory of the US Dollar, which had previously enjoyed robust support as traders anticipated a Trump win.
“Should Trump secure a second term, we could see a revival of economic policies centered on deregulation and tax cuts, which would likely strengthen the US Dollar further,” noted analysts at TD Securities. Conversely, Harris’s presidency could lead to a more expansive fiscal policy, which may weaken the Greenback and create a favorable environment for the Euro.
European Central Bank’s Rate Cut on the Horizon
In addition to the election, traders are keenly focused on the European Central Bank’s (ECB) upcoming policy decisions. The ECB is expected to cut interest rates by 25 basis points in December, a move aimed at stimulating the Eurozone economy amid concerns about sluggish growth. This anticipated rate cut could have mixed implications for the Euro, potentially limiting its strength against the US Dollar in the short term.
However, recent economic data from the Eurozone has provided a glimmer of hope. Better-than-expected GDP growth in Q3 has alleviated some fears of a deep recession, and improved readings from the HCOB Manufacturing PMI suggest that while challenges remain, the situation may not be as dire as previously thought.
Also read : EUR/USD Surges Past 1.0900 As Weak Dollar And U.S. Election Volatility Shake Markets
Key Economic Indicators to Watch
As the election unfolds, market participants will also be keeping an eye on key economic indicators, including the US ISM Services Purchasing Managers Index (PMI) scheduled for release later today. The PMI is forecasted to dip slightly to 53.8, down from 54.9 in September, indicating continued growth in the services sector but at a slower pace. This data will be crucial for gauging the health of the US economy and may influence the Federal Reserve’s upcoming monetary policy decisions.
