After US President Joe Biden withdrew his candidacy for re-election, there should be an effect on the currency market. After all, everyone says that speculative market participants had positioned themselves in line with the effects that are supposedly to be expected if Donald Trump becomes US president again. And, since the chances of almost every Democrat candidate are likely to be higher than those of the apparently mentally unfit Biden, there should be a partial reversal of the Trump trade today. But that’s not the case, Commerzbank’s FX strategist Ulrich Leuchtmann notes.
USD doesn’t react much to Biden stepping down
“The Dollar Index (DXY) opened this morning in Asia with only slight twitches, but is essentially trading at the same levels as on Friday. The yields on US government bonds are also only marginally changed. And even the Mexican peso – the “mother of all Trump trades” – is trading more or less where it ended last week. Why?”
“The fact that Biden would withdraw his candidacy was already being whispered on Friday. The timing of his communication is likely to have only very marginal effects on the outcome of the election in November. And thus, the market reaction this morning should also be minimal. I'm not sure whether the talk about the Trump trade has any substance or is just another urban legend.”
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