Dollar's Fall Shows No "Trump Trade" Reboot From 2nd Assassination Attempt

Image © White House

Dollar exchange rates are lower across the board despite news of a second assassination attempt on Donald Trump.

The Dollar rose following the first attempt was made on the former President's life in July, signalling that markets saw the developments as boosting his odds of winning the November vote.

"Financial markets are calm and there are no signs of a resurgence in the ‘Trump trade’ after Secret Service agents fired on a gunman at the former president’s Florida golf course," says Karl Schamotta, Chief Market Strategist at Corpay.

The Trump Trade describes the market reaction to increasing expectations of a second Trump presidency and is typically defined by a rising U.S. Dollar.

"Prediction markets are still showing Kamala Harris holding a slight lead in the race to become the next US president, and assets that might benefit from a policy mix defined by tighter immigration, looser regulations, greater protectionism, and higher inflation - the dollar, Treasury yields, and bank, health, and energy stocks - are broadly softer," says Schamotta.

Instead, the Dollar looks fully focused on the outcome of Wednesday's Federal Reserve decision, where a great degree of uncertainty rests on whether the central bank will cut by 25 basis points or 50 basis points.

The 50bp option has gained traction following news reports last week that appeared to be a coordinated leak from the Fed to try and bolster expectations for such a move.

Market pricing on Monday shows a 50bp move is now preferred with odds of 60%.

"A 25bp cut scenario would see the USD shift onto better ground, especially given the extensive pricing for rate cuts already factored into markets and signs of excessive short USD positioning," says Clyde Wardle, Senior EM FX Strategist at HSBC.