- Republican National Convention this week.
- Democrat Biden in the lead, after DNC.
- US dollar bearish momentum wanes.
The US presidential election on November 3 is a significant catalyst ahead for the US dollar to make a bounce back. The incumbent president was lagging his contender, former Vice President Joe Biden, in the polls after the Democratic National Convention.
Now, this week we have the Republican National Convention from August 24 to 27. Contrary to the tradition of allowing the presidential candidate to speak once – the acceptance speech, Trump will be speaking every night of the RNC.
Even though it is usual for Trump to scuttle traditional approaches, the frequent-talk schedule could be interpreted as a sign of urgency, especially after his Democratic rival started winning followers even from the Republican sympathizers. A case in point was the open letter from 70 former Republican national security officials citing the demonstrated lack of character and competence along with corrupt behavior, not befitting the position of the US President. In the letter, they have thrown their support behind Biden.
The RNC lineup this year is also unusual with 5 out of the 12 speakers from the Trump family.
Now, the chances of the president going all out to galvanize more support are high, which means that we will see more rhetoric from Trump, which could affect relations with different countries. Markets might recede to a risk-off nature if more aggressive anti-China comments along with the more trade tussle with Europe ensues – due to his desperate attempts to rally support.
The dollar will benefit immensely from such a scenario, and the current selling momentum will pause. The US dollar index – weighs the dollar against a basket of JPY, AUD, EUR and GBP – has fallen over 12 Percent from its recent high of 1.4169 in the middle of March.
Since August three, the bulls and the bears couldn’t sustain a good move in either direction. If the dollar bounces back, the immediate gains could top at 1.2630.
