• Joel

USD hit as Trump suggests election delay

USD hit as Trump suggests election delay

USD was hit today by bizarre tweet from US President Trump;

“With Universal Mail-In Voting (not Absentee Voting, which is good), 2020 will be the most INACCURATE & FRAUDULENT Election in history. It will be a great embarrassment to the USA. Delay the Election until people can properly, securely and safely vote???” tweeted the President at around 1345BST/0845EDT.

DXY was swiftly hit, slipping back towards lows of the day around 93.20, giving a boost to its major counterparts; EURUSD popped back above 1.1800, GBPUSD advanced above 1.3050 and AUD, NZD and CAD have all recovered off lows.

The US stock market was also hit, so what explains this markets reaction?

Changing the election date is unlikely, as, explains the BBC, “it would take an act of Congress - approved by majorities in the Democratic-controlled House of Representatives and the Republican-controlled Senate - to change that."

Still, a further element of political uncertainty is now being introduced to markets. What is Trump gets his way and the election is postponed? When would it be postponed until?

The way Trump wrote his tweet seems to suggest the election would need to be postponed until after the Covid-19 virus has been contained via a vaccine before people would be able to vote again in the manner he sees as appropriate.

So could the election be postponed for another year? Or longer?

If this was the case, what would the implications be for US/China relations, the US’ economic recovery and the US strategy towards containing the Covid-19 virus in the interim.

Of course, it would suit Trump down to a tee to delay the election, given how badly he lags Democratic Nominee Biden in national polling at the moment. Others have accused Trump of seeking to create a distraction from today’s disastrous GDP numbers for Q2.

US Q2 GDP came out today, printing largely in line with consensus expectations at -32.9% Q/Q (exp. -34.1%). As a result of the data coming out pretty close to expectations, the market reaction has been very limited, though that shouldn’t take away from the fact this was a historic, record-beating decline in US economic activity, caused by the Covid-19 pandemic and the impact of lockdowns.

Where next for USD?

Even assuming that this “delay the election” idea/theme, which has clearly been a USD negative today, doesn’t pick up further traction (which I think it probably won’t, given how difficult it would be for Trump to pull this off), USD is still primed for further downside.

Looking at DXY technically, despite risk off markets and growing Covid-19 concerns in Europe and in other key global markets (Japan and Australia), DXY was unable to convincingly recover back above 93.50 today. A “sell the rally” attitude appears to have been capping the action.

Now with the latest spanner thrown in the works from Trump, I see no reason why USD should not finish the week on the back foot, even if today’s risk off move in other asset classes (such as stocks) continues. 



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