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The US dollar showed its maximum growth last Friday, since September ended. This is primarily due to the rising cases of COVID-19 in Europe and the uncertainty pre-election in the United States.
Today, the indicated currency is trying to keep the advantage gained earlier, trading above the mark of 94 points.
The long-awaited US presidential election will take place on Tuesday.
According to some sources, although the chances of Joe Biden winning are now estimated at 89%, many experts believe that we should not make early conclusions yet because of what happened during the 2016 elections.
Mr. Donald Trump has recently managed to somewhat narrow the gap, especially in key fluctuating states such as Florida, Wisconsin and Michigan. If he will be re-elected, the US dollar is expected to rise against the currencies of the G10 countries.
On the contrary, if Mr. Joe Biden wins, the US dollar is expected to weaken.
In case that the election results will be delayed or if something controversial appeared after that, this will lead to a rise in volatility in the currency market. If this happens, the USD may strengthen amid increasing demand for defensive assets.
Experts from Commonwealth Bank of Australia noted that the currency volatility may increase after the election day, since it is possible that the losing candidate will question the election results. If we recall the 2016 election, it took around a month to resolve the disagreement.
In the 24 hours after the US presidential election in 2016, the EUR/USD trading range was 300 points. If one of the candidates refuses to recognize the results of the upcoming vote, the fluctuations may be more dramatic.
Last Friday, the classic pair tried to recover around the level of 1.1700, however, it pulled back so it closed the day around the level of 1.1645.
In terms of news background, ECB's head, Christine Lagarde, hinted that markets should expect new stimulus from the regulator in December. She also warned that the eurozone could face another recession if the region's economy returns to the compression zone in the fourth quarter after rebounding a quarter earlier.
After realizing that Europe is ahead of the United States in terms of quantitative easing and quarantine restrictions, it triggered a sell-off in the Euro last week and helped strengthen the US dollar.
If the pressure on the single European currency continues in November, the EUR/USD pair may well update the September lows located around 1.1600 after the US presidential election.
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