U.S Election: initial results point to a close race
Updated: Nov 24, 2020
This U.S election is, indubitably, the most significant in the country's recent history, and as the initial results come in, it is going to be a close race. The greater number of mail-in ballots have meant that the poll counters have a far more arduous task to tabulate the votes than in the past, as they validate names and signatures to stomp out potential fraud.
Taking into account this prolonged counting process, this commentary offers a fresh summary of the present state of play both in terms of the election and the market.
To win the election a candidate needs at least 270 of the 538 votes on the electoral votes.
Examining the Electoral College map, (see below) according to broadcasters’ projections, President Trump could be en route to win his second term, but with millions of mail-in votes with the majority in Democratic-leaning county's still to be counted, means these initial results are by no means concrete. Nevertheless, it's a tight race.
As to the race for control of the Senate and the House. Earlier today, Democrats picked up one new seat in the Senate, but the net gain remained zero. While Democrats maintained a majority in the House of Representatives.
On the FX market side, prior to the first ballot closing the USD was weighed down as the most recent polls consistently pointed to a Biden victory. The Dollar was down (-0.61%) and the major currencies such as EUR, GBP, CAD, and JPY traded higher, +0.61%, +1.13%, 0.64%, and 0.24%, respectively, as investors were eager to press any indication to who would be the next U.S President, and banks, fund managers, and investors loaded up their bets against the dollar based on the “Blue Wave” prospect.
While the first votes were counted and showed a significant Joe Biden advantage, Trump betting odds were getting slashed in online betting markets, according to Betfair Exchange (9:30 pm et).
However, President Donald Trump's chances of the second term gained sharply overnight as the two candidates traded blow for blow and claimed their expected territories. Biden is expecting to flip Arizona which is a big win, but he still needed two of the three of MI PA and WI to win. Wisconsin vowed to get the vote done by 5am however PA and MI were less optimistic. Pennsylvania struggled during the primaries and stated that it may be Friday before they know (especially if there is a recount) meaning the Supreme Court could be brought in again. Currently hanging over the PA vote is three lawsuits that have been filed in connection with the election.
All the while, the Dollar Index which measures the U.S. dollar value against a basket of major currencies, found a bid overnight, trading up over 0.50% higher from its lows at the start of the election.
US 10-year bond, meanwhile, had jumped to over 0.9% overnight on Tuesday, their highest level since June, as the prospects of a win for Democratic candidate Joe Biden paved the way for a large spending fiscal package. However, as the initial results showed a potential Trump victory in crucial states and in turn presented the prospect of a very tight race, bond markets rallied, pushing the benchmark 10-year rate down towards 0.8%.
Earlier this morning, the U.S. dollar jumped, risk-sensitive currencies weakened, and wind-back of bets on a victory by Democratic challenger Joe Biden, as initial results showed that Trump won Florida. The outcome in the most critical states showed a very tight race. This has triggered a demand for safe-haven currencies on the back of the uncertain U.S political environment ahead.
The CNY and JPY fell 0.48% and 0.45%, respectively in Wednesday’s Asian session, as markets began to price in the likelihood of a victory for President Donald Trump.
At the time of writing, President Trump has won Florida, and the focus is now on the three Northern industrial states — Wisconsin, (currently Biden) Michigan, and Pennsylvania (currently Trump) and Georgia (dead heat) — to decide who wins the White House. However, it is worth considering that the votes that are left to be counted are mail-in votes, which over the election, have heavily swung towards Biden as much of his support felt it a health risk to go to the polls during the current pandemic.
Nonetheless, investors braced for the possibility that the election final results may not become clear on Wednesday, but the poll expectations of a “Blue Wave” have dramatically diminished. Hold on to your britches.