US equity markets continue to roar but FX market quiets
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Dollar feeling the push and pull
There really isn’t a clear paradigm for how the US dollar is reacting to the latest leg higher in equities and the idea that Democrats will spend more in the White House.
Higher spending means higher growth means higher rates means higher dollar is one way to look at it. Another is that higher fiscal deficits, higher trade deficits and spillovers benefit other currencies more, particularly in the commodity bloc.
Today’s trading is a mix of both as we saw the dollar rise earlier but now it’s rebounded, even as equities go higher in a straight line. The S&P 500 is now up 50 points to a record 3848.
“If he is elected, the stock market will crash,” Trump said during the Presidential debate on Oct 22.
Meanwhile in FX, USD/CAD is back up to 1.2651 from a low of 1.2606. Other dollar trades are also consolidating within the daily ranges.