US 2020 Election result poised on a knife-edge

Markets have been whipsawed by competing and conflicting indicators of who will win the 2020 US presidential election.

• Blue Wave result seems dead with Trump close to victory, but the result is on a knife edge
• Trump did much better than polls indicated with a win in Florida opening the path to the presidency. Fears of the Republicans losing Texas (38 Electoral College votes) proved unfounded and Trump leads in Georgia (16) and North Carolina (15).
• Biden called to win Arizona (11), which leaves the key Rust Belt states of Wisconsin (10), Michigan (16) and Pennsylvania to decide the election – exactly as was expected.
• But these won’t be called imminently and it may take days to decide final outcome, not even considering legal challenges prolonging the agony – A result today may not be possible, though if Biden clears 270 it seems difficult for Trump to mount a serious legal challenge.
• Bonds moved fiercely overnight with US 10s in a range of 0.945-0.791
• FX moves were significant, with GBPUSD across two big figures, from a high of 1.3140 to under 1.2930
• DXY rises to highest level since end of Sep at 94.34, before it pared gains to retreat under 94.
• Gold whipsawed between $1916 and $1880 before retracing back to around $1890.

Ahead of the European open, Donald Trump sent futures lower by declaring victory in the election before all the counting is over. He played the voter fraud card and this undoubtedly unsettled markets, since a long and protracted battle in the courts is precisely what investors do not want.

Trump spoke of trying to protect the “integrity” of the vote – choosing to frame this has he being the defender of the constitution, not the usurper. Trump said that “we have already won this” and that “we will be going to the US Supreme Court”, whilst talking about the Democrats “disenfranchising” voters. Nevertheless, Trump can still win this vote, whilst European cash equity markets recovered some poise after the first hour of trade to claw their way back to the flatline, whilst US futures remain broadly positive, led by Tech.