The US dollar plummeted and US Treasury yields fell sharply on Monday as investors reassessed their bets on a Donald Trump victory in the upcoming presidential election, Bloomberg reports.
This shift in sentiment followed weekend polls indicating that Kamala Harris was gaining ground in the race for the White House.
An index tracking the greenback experienced its most significant drop in over a month, while the Mexican peso – which took a nosedive after Trump’s 2016 win – emerged as the top performer among major currencies. US stock futures also saw gains.
The latest polls, including an ABC News/Ipsos survey showing Harris ahead by 49% to 46% nationally, and a New York Times/Siena survey placing Harris ahead in five of seven swing states, fueled the market shift. Although these leads were within the margin of error, and a separate NBC News poll indicated a deadlocked race, investors reacted to the growing perception of a potential Harris victory.
The dollar gauge and 10-year Treasury yields had recently hit their highest points since July, fueled by investor enthusiasm for a second Trump term. This sentiment stemmed from the belief that Trump’s pro-growth policies, including looser fiscal policy and high tariffs, would lead to a wider federal deficit and increased inflation. This, in turn, was expected to push up interest rates, benefiting the dollar but hurting Treasuries. However, the recent poll results have cast doubt on this trajectory.
The yield on 10-year US Treasuries dropped by nine basis points to 4.29%, signaling a shift in market sentiment.
In addition to the election, trading across global markets this week will also be influenced by central bank decisions from the US, UK, and Australia, among others. The Federal Reserve is expected to lower rates by 25 basis points on Thursday, following the latest jobs report which revealed a slowdown in hiring despite a low unemployment rate. The Bank of England is also anticipated to lower its benchmark rate by a quarter point to 4.75%.
Beyond the political and monetary developments, the tech sector witnessed some notable changes. Nvidia Corp. saw a 2.3% rise in early trading after being announced as Intel Corp.’s replacement in the Dow Jones Industrial Average. Intel, conversely, dropped by 2.3%. Apple Inc. experienced a 0.4% decline following news that Warren Buffett’s Berkshire Hathaway Inc. continued selling shares in the iPhone maker.
