Deutsche Bank has released a matrix of potential market reactions to various US election scenarios, while admitting that its own team is divided and the reactions are highly uncertain.

“We see the most bullish dollar outcome
as a red sweep and the most bearish dollar outcome on a blue sweep, but the
magnitude of the moves is likely larger in the former,” the report says. “We see short EUR/CAD and
long MXN/ZAR as the two most asymmetric trades in FX heading in to the
election.”

They examine four scenarios focused on Presidential winners with or without Congressional control:

• Red Sweep (Republican control): Most bullish for USD across the board
• Blue Sweep (Democratic control): Most bearish for USD, but moves likely smaller than in Red Sweep
• Trump win without Congress: USD strength, but FX carry trades at risk
• Harris win without Congress: Mixed bag, with Asian FX potential outperformer

The big questions are around the size and impact of tariffs as well as countervailing duties but there is also uncertainty around deficits, though a strong sense that any sort of mixed Congress would mean lower deficits than any kind of sweep.