US dollar, Treasuries fall as markets as confidence in Trump victory wanes
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The news: The US dollar weakened, and Treasury yields fell as markets adjusted positions ahead of Tuesday’s US presidential election, with traders exiting positions that had benefited from speculation Republican candidate Donald Trump is more likely to win.
The numbers: The Bloomberg Dollar Spot Index dropped 0.7%, marking its steepest decline since August, and the WSJ Dollar Index fell 0.6%.
The 10-year US Treasury yield decreased by up to 12 basis points to 4.26%, reversing gains from last week.
The moves came after a poll by influential pollster J Ann Selzer showed Democratic candidate Kamala Harris leading in Republican-leaning Iowa, reducing confidence in a Trump victory.
The context: Markets had been positioning for a Trump victory, expecting policies driving low taxes for the wealthy and for corporates, tariffs and stricter immigration policies. Tariffs and planned mass deportations are viewed as potential drivers of inflation, which could push both longer-term yields and the dollar higher.
Harris’s lead in the Iowa poll suggested potential shifts, causing traders to unwind “Trump trades.” Betting markets were also showing tighter results, with odds shifting toward Harris on PredictIt but still favouring Trump on other platforms.
The Mexican peso rose 1.6% against the dollar, benefiting from eased concerns over Trump’s tariff threats.
Stocks showed mixed performance, with the Nasdaq and S&P 500 inching up in late morning trading on Monday US time, while the Dow was slipping.
Oil prices surged by 2.5% following OPEC+’s delay in a supply increase and concerns over potential Iranian retaliation against Israel.
The sources: The Financial Times , Bloomberg , The Wall Street Journal , Reuters
