Investing.com — Rising prospect of a Democratic victory is forcing traders to unwind the ‘Trump trades’ including the dollar bid, Macquarie says, as Democratic presidential candidate Kamala Harris increasingly enters ‘Kamala-mentum’ the race continues to call for the White House.
“We believe the rising prospect of a Democratic victory in the presidential race has put an end to the ‘Trump trades’, including the stronger view on the USD,” Macquarie strategists said in a note on Tuesday as the dollar continued to weaken.
A strong dollar and Trump’s potential election victory have become closely linked, as the former president’s proposed core policies — including tax breaks, immigration restrictions and tariffs — “would be viewed as more inflationary, leaving policy rates higher than otherwise.” they said.
More dollar pain could follow next week, the strategists added, if Harris manages to elevate her platform at the Democratic National Convention this week.
“So a post-convention rebound in Kamala Harris’ polls next week could weaken the USD even further,” she added.
The “Kamala-mentum” unleashed after President Joe Biden resigned and endorsed Harris was driven by a “more effective campaign than President Joe Biden’s.”
Harris’ accelerated move to the top of the Democratic ticket has also taken the Trump team by surprise and “given them fewer ways to attack Harris than he had for Biden,” Macquarie said.
“As Trump’s attacks have been neutralized, this has likely caused enthusiasm among his base to also wane,” it added.
Politics aside, however, the dollar’s weakness since early August is confusing, Macquarie says, as recent economic data – including retail sales, initial claims and services ISM – “has pointed to renewed relative strength in the US, following concerns about a decline of the American economy. entered a recession in late July and early August.”
