State Street: Biden's Abandonment Puts Dollar at Risk

According to State Street, the dollar could see a "short-term negative reaction" if Biden drops out of the U.S. presidential race and traders cut back on trades related to Donald Trump's victory as a result. According to Noel Dixon, macro strategist at State Street, Biden's withdrawal would make the race more competitive and trigger market volatility, and "what's being digested right now is basically a Trump win." The "Trump deal" has investors betting that his economic policies will only reignite inflation, putting pressure on long-term Treasury yields and pushing up the dollar. "There will be fiscal stimulus impulses from both parties but less from a Biden administration," Dixon said, adding that "all else being equal, the long end of the U.S. Treasury yield curve will be under less pressure." Traders will have to adjust their positions to accommodate this change.