Capital abhors a vacuum and even with the U.S. general election three days away, capital will try to cut through the campaign noise and seek out a return. From a political and legal event perspective, traders should assess the strength of legal challenges to voting, especially challenges raised by the Republican Party.
Republicans and Democrats have been building their legal teams for over a year and both will be on the lookout for voting irregularities including evidence of voter suppression or voter fraud. Republicans are expected to challenge authenticity of mail-in ballots and the deadlines for when these ballots are expected to be received. Traders should be particularly mindful of the intensity of Republican challenges given that incumbent president Donald J. Trump is running behind Democratic nominee Joseph R. Biden in national polls.
Real Clear Politics has Mr Biden polling at 51.3% versus Mr Trumps 43.5% during the period 21 October to 30 October 2020. PredictIt is pricing a .65 probability of a Democratic takeover of the White House versus a probability of .40 that the Republican Party maintains control of the Oval Office.
But the foreign exchange markets appear to see the value of the US dollar priced in various currencies increasing as we get closer to the election.
| Country/Currency | 24 October | 25 October | 26 October | 27 October | 28 October | 29 October | 30 October | 31 October |
| Mexico (MXN) | 20.9210 | 20.8408 | 20.8476 | 20.9667 | 20.9271 | 21.1694 | 21.3101 | 21.2962 |
| Canada (CAD) | 1.31361 | 1.31191 | 1.31220 | 1.31829 | 1.31776 | 1.32555 | 1.33221 | 1.33172 |
| Japan (Yen) | 104.72 | 104.66 | 104.67 | 104.87 | 104.61 | 104.30 | 104.44 | 104.49 |
| China (Yuan) | 6.67733 | 6.67680 | 6.67680 | 6.69916 | 6.70515 | 6.71672 | 6.71157 | 6.68746 |
| Euro | .84496 | .84274 | .84288 | .84578 | .84622 | .85056 | .85398 | .85694 |
| Eastern Caribbean Dollar | 2.70 | 2.70 | 2.70 | 2.70 | 2.70 | 2.70 | 2.70 | 2.70 |
| Brazil (BRL) | 5.60180 | 5.61840 | 5.61818 | 5.62115 | 5.64474 | 5.72242 | 5.75821 | 5.76506 |
With the exception of Japan and the Eastern Caribbean, the prices in foreign currency offered for a US Dollar have been inching up over the last week. Traders in the above nations reflect a number of major US trading partners and the increase in the amount traders in these countries are willing to offer a seller of the US dollar tells me that at a minimum, they have positive expectation in the potential for growth in the US and that public policies offered by Mr Biden might not deter expected growth or value of the dollar.
Again, traders should be on the lookout for any legal, legislative, or regulatory actions that thwart the ability of Mr Biden to garner enough votes to win the Electoral College.
Additional source: OANDA.com
Alton Drew's The Interbank Market 