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FIRST PRESIDENTIAL DEBATE BEFORE NOVEMBER 3, 2020 PRESIDENTIAL ELECTION - 29/09/2020

Micro Analysis

29 September, 2020

For General Information only. Not Intended to Provide Trading or Investment Advice. Your Capital is at Risk.

The first presidential debate between Republican Donald Trump and Democrat Joseph Biden is expected to be closely watched by the financial markets, as it tends to increase the market uncertainties and, therefore, the market volatility. The debate will take place at 2:00 a.m. GMT+1(Wednesday, September 30). Current polls have shown that Democrat Joseph Biden was in the lead by margin of between 5 and 8% (according to several polls), which is putting Donald Trump at unease. To this end, Mr. Trump is expected to do his best at his first appearance, seeing a good chance to turn the polls around afterwards.

OPINION: Our belief is that Donald Trump will do better than Joseph Biden at the first presidential debate. We believe that this will increase chances for Donald Trump to win a second presidential term. To this end, our expectations favor a short-term positive performance by the US Stock Indices, Gold, Silver and Crude Oil. This in turn, should increase the value of the EUR/USD and the GBP/USD as well.

US STOCK MARKETS

  • Donald Trump Wins the First Debate: Stock Markets Expected to go UP

Donald Trump has been known as a “good friend” to the stock markets, as it continued to favor strong stock market performances throughout his presidency. To this end, if he wins the first debate and increases his chances to win the November Presidential Election, we can expect a positive reaction by the stock markets. To this end, we can expect major stock market indices (USA500, USA100 and USA30) to go up.

  • Donald Trump Loses the First Debate: Stock Markets Expected to go DOWN

Joseph Biden has repeatedly said that he will increase corporate taxes if he wins the November Presidential Election and therefore we can expect a negative stock market reaction if Donald Trump loses the first presidential debate. To this end, we can expect major stock market indices (USA500, USA100 and USA30) to go down.

GOLD/SILVER

  • Donald Trump Wins the First Debate: Gold/Silver Expected to go UP

Donald Trump has been a great advocate of looser monetary and fiscal policy, which tends to decrease real market yields and therefore support the safe-haven Gold and Silver. To this end, we can expect Gold and Silver to go up if Donald Trump wins the first presidential debate.

  • Donald Trump Loses the First Debate: Gold/Silver Expected to go DOWN

Donald Trump has been also very tough to China on trade, which has increased market uncertainties since 2018. This would push investors towards the safe-haven Gold/Silver, which have increased significantly since the start of the trade tensions between the US and China. If Donald Trump loses the November Presidential Election we can expect Gold and Silver to fall in demand as the markets might think that the tensions between the US and China, without Donald Trump, will cool down.

US DOLLAR

  • Donald Trump Wins the First Debate: US Dollar Expected to go DOWN

As Donald Trump has continued to favor lower interest rates and looser fiscal policy, which tends to increase money supply, we can expect the US dollar to lose value due to higher inflationary pressure. This, in turn, should continue to put negative pressure on the value of the US dollar. To this end, we can expect the EUR/USD and the GBP/USD to rise in value if Donald Trump wins the first debate.

  • Donald Trump Loses the First Debate: US Dollar Expected to go UP

Short-term impact could be positive for the US Dollar if chances for Donald Trump to win the November election decrease. The market got used to Donald Trump’s efforts to press for more accommodative/looser monetary and fiscal policy and without him in office the markets could have second thoughts whether current accommodative monetary and fiscal policy would remain in place for as long as previously thought. This, in turn, could increase short-term demand for the US dollar. To this end, we can expect the EUR/USD and the GBP/USD to go down in value if Donald Trump loses the first debate.

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