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President Trump tweeted on Friday that he tested positive for coronavirus (covid19). The initial reaction was a short-lived spike lower across US indices, which was pared by the weekly close.
President Trump is 74 years old, which places him in the risk group. The market is slowly digesting the news. Should President Trump’s health deteriorate or improve the market is likely to react. Any updates on his condition may trigger unusual volatility within the next 2 weeks.
There has been conflicting reports on the President’s health. He has been administered an experimental drug that has yet to be approved by the FDA.
The Dow, SP500 and Nasdaq100 were sold on the news. Crude oil was pressed lower, which is a typical indication of a risk aversion mode.
Due to the Fed’s ultra low interest rates the US Dollar (USD) is benefiting from safe-haven flows. The coronavirus did dent some of the common correlations such as JPY and CHF strength. Based on past events at a certain stage the currency correlations will normalize once again.
As President Trump must remain in quarantine his elections’ campaigns may be placed on hold, which may have a negative impact on the polls. As we are close to November the market may begin reacting to the elections’ polls. Many markets will be affected including forex, commodities and indices.
How the market will react if President Trump is down in the polls? President Trump claimed the markets will collapse if he loses the elections. Based on recent market reaction to the tweet it appears the sell-off was triggered by a US President infected with covid19 rather than the individual himself.
Based on today’s reaction we are not expecting the market to ‘collapse’ should President Trump lose the elections. There may be some reaction but not as significant we have seen the US 2016 elections trading signals where we predicted Donald Trump will win.
The main volatility may be seen several days after the elections, which we will cover as well. The next question among many trades and investors is how will the market trend after President Trump’s positive results?
How Will the Markets Trade?
We will cover EURUSD from the Forex market, the SP500 (CFD or futures) and gold (XAU/USD). We will be using long time frames to determine how the market will trade within the next several days, possibly weeks.
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