05.11.202016:15 Forex Analysis & Reviews: EUR/USD. The euro depends on the outcome of the US election

The US stock market rose significantly following the results of trading on Wednesday. In particular, the S&P 500 index showed the highest rise in its history for the day after the US presidential election.

Investors reacted positively to the prospect of Democrat Joe Biden entering the White House, welcoming the imminent end of uncertainty about the outcome of the November 3 vote.

Against this background, the greenback reached two-week lows, sinking below the mark of 93 points.

Joe Biden is just a few steps away from winning. He has already won 264 electoral votes to Donald Trump's 214.

Meanwhile, the experts' hopes that the so-called "blue wave" will become the result of the November elections in the United States does not seem to have come true. The result is that the Senate will remain Republican, and the Democrats' advantage in the House of Representatives will be reduced.

Thus, investors should be prepared to assume that the progress of the aid package for the US economy will still depend on the ability of the two opposing parties to agree, which will seriously delay the process.

Also, D. Trump does not intend to give up without a fight. He has already criticized the vote count in several states and even filed lawsuits demanding a recount. This means that market participants should prepare for several days or even weeks of uncertainty.

According to some estimates, if Joe Biden wins, the greenback may fall by about 5%, which will send the euro to the $ 1.25 area.

Biden is expected to pursue a more peaceful trade policy, which is likely to put pressure on the dollar and provoke increased demand for risky assets.

The weakening of the US currency will be limited if the Federal Reserve reduces its activity due to increased fiscal stimulus, which will spur growth in the US economy and increase the risks of interest rate hikes.

The USD depreciation will be deeper if the global epidemiological situation improves or if a reliable COVID-19 vaccine becomes available.

Donald Trump's re-election will mean the continued tension in trade relations between Washington and Brussels.

The growing incidence of COVID-19 in the EU may weaken the region's economic recovery, which also needs to be taken into account.

The European Commission estimates that the Eurozone economy will contract by 0.1% in the fourth quarter compared to the previous one due to new restrictions caused by the second wave of coronavirus. This year, the currency bloc expects the sharpest decline in history – by 7.8%.