Dollar's Verdict is Harris Won the Debate

Photo credit: Lawrence Jackson / Biden for President via Flickr.

GBP/USD traded higher in midweek trade, with some analysts attributing a weaker USD to a strong showing by U.S. Presidential Candidate Kamala Harris.

"A weaker dollar (and bitcoin) across the board, Asia EMFX outperformance, and softer US equity futures match opinion polls pointing to Harris having done better than Trump in the first presidential debate," says Francesco Pesole, a foreign exchange analyst at ING Bank N.V.

Registered voters who watched Tuesday’s presidential debate between Trump and Harris "broadly agree" that Kamala Harris outperformed Donald Trump, according to a CNN poll of debate watchers conducted by SSRS. The vice president also outpaced both debate watchers' expectations for her and Joe Biden’s onstage performance against the former president earlier this year, the poll found.

"USD weakened by about 0.3% following the US presidential debate," says Carol Kong, an analyst at Commonwealth Bank of Australia. "Judging by the reaction of financial markets, Vice President Harris is the winner of the presidential debate."

The PredictIt betting market shows Vice President Harris now has a 10 point lead over President Trump compared to near even odds prior to the debate.

Heading into the debate, the stance amongst foreign exchange analysts is that a Trump presidency would be, on balance, a supportive outcome for dollar exchange rates. Harris' strong showing pushes back against this outcome and the Dollar.

"Markets seem to have awarded Harris a victory on points... In FX, a Trump win is associated with a stronger dollar, which is trading on the soft side across the board," explains Pesole.

The GBP to USD exchange rate has been under pressure in September as a strong rally through late August is pared back. Analysts say September is a seasonally strong month for the Dollar, but it can then weaken into year-end amidst a number of interest rate cuts from the Federal Reserve.

However, one uncertainty is the outcome of the presidential election, which means the debate was closely watched by markets.

The GBP to USD conversion was as low as 1.3049 on Tuesday before recovering to 1.3111 on Wednesday, although a disappointing UK GDP release has weighed.

Pesole says the moves in the market following the debate are generally quite contained in size.

"Betting odds are seeing Trump’s chances of winning the election back below 50%, but both campaigns signalled openness to another debate, and markets may want to wait on new opinion polls in the coming days to take more decisive positions on the election. For now, indications that Harris won this debate, even if by a small margin, can keep a lid on the dollar and generally prompt a more favourable environment for currencies with a high beta to protectionism and geopolitical issues," says Pesole.