The political tailwind for the US dollar is weakening

Since Donald Trump took office as US President three and a half years ago, he has provided ample opportunity for discussion. In many respects he has broken new ground, violated diplomatic conventions and regularly pushed the envelope of good taste. Nevertheless, it is not only his party friends who must attest to his remarkable economic success. Anything less than a re-election of Trump seemed unthinkable a few months ago. Neither the trade war with China nor the impeachment proceedings could do anything to change this success story.

And then came Covid-19. Trump is currently facing unprecedented headwinds. His democratic challenger Joe Biden now has an extremely comfortable lead in the polls. There are 127 days left until the US presidential election, a small eternity in such volatile political times as the current ones. It would be foolish to assume even now that the change of power is certain to come. Not only will Trump fight like a shot tiger for every vote more aggressively than ever, but the outcome of the US election four years ago was decided only shortly before the ballot.

Should Trump actually lose the election in November, there is probably no immediate threat of turbulence. This is certainly worth mentioning, as only a few months ago this danger was a very serious one with regard to the Democratic candidates. Although the US currency will certainly not welcome a new US President Biden with great joy, the chances are that he will be seen as neutral for the time being and will turn to other issues until Biden has worked out a clearer profile. On the other hand, the US dollar should not place too much hope in a second term of Trump: the euphoric advance praise it received from the markets four years ago can hardly be repeated; instead, the struggle with the long-term consequences of Covid-19 would also weigh on his next term of office.

Overall, the US dollar is therefore unlikely to benefit much from the upcoming US presidential election. On the other hand, if the euro countries maintain their most recent unity and the Covid-19 crisis is overcome in a united fashion, the euro could receive sustained support.

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