5% Decline in Chinese Yuan Seen on Trump Win

• Financial markets continue to track betting market odds
• Trump win looking well priced
• USD favoured, CNY at risk says Crédit Agricole
• The bank sees 40% chance of Republican sweep

Image: Polymarket.

Currency strategists at Crédit Agricole say they are buyers of the Dollar against the Chinese Yuan as they see a 60% chance of victory for Donald Trump vs 40% for Kamala Harris.

"We expect that the CNY is likely to come under renewed pressure from the threat of trade war and the expectation that Trump’s policies will strengthen the USD," says Eddie Cheung, Senior EM Strategist at Crédit Agricole.

Strategists at Crédit Agricole say that in the event that Trump levies 60% tariffs on all Chinese imports, which he has made a keystone policy, there is scope for USD/CNY to target 7.50 by H125, which is about 5% from current spot levels.

Financial market expectations, which are informed by betting market odds, favour Trump to win with 60% odds.

"While Kamala Harris and Donald Trump are tied in the most crucial swing states, and polls always hover around 50/50, betting markets are now putting Trump as a clear favourite to win the election, with 57-61% in favour of the former president," says Patrik Lidin, Sports Betting Expert at JustGamblers.com.

Financial market expectations closely track those of the betting market owing to the high hit rate punters have when calling the next U.S. president.

According to Lidin, the betting market's favourite has won 8 out of 9 times, or 88.8% of the time, since 1988.

Above: Polymarket's odds for the Presidency have widened in favour of Trump.

The last time an underdog candidate won was in 2016 when Trump beat Hillary Clinton.

"Betting markets have evolved into reasonably accurate predictors of elections, even more than some polls" says Thomas Gift, a political scientist who runs the Centre on U.S. Politics at University College London.

Lidin explains the betting market might favour Trump at this stage as Harris doesn't look well placed. He says she didn't receive a single primary vote in 2020 and that left-leaning NBC News reported in 2023 that Harris received the worst vice presidential rating in NBC poll’s history.

"She’s not an ideal candidate, but the next best thing after Joe Biden pulled out of the race on July 21. Meanwhile, Trump and JD Vance have improved their public image with endorsements from Elon Musk and former Democrats such as Robert F. Kennedy Jr. and Tulsi Gabbard. Given the track record, I’d trust the betting markets more than polls when Trump is in the equation," says Lidin.

Crédit Agricole says if Trump wins, there is a 2-in-3 chance of a Republican sweep (40% overall).

Under a Harris victory, there is a 3-in-4 chance of a divided government (30% overall) making that the second most likely scenario.

The vote happens next Tuesday and authorities in China are anticipated to deliver a fresh policy stimulus once the outcome is known.

China will next week issue over 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its fragile economy.

The fiscal package is expected to be further bolstered if Donald Trump wins the U.S. election, according to Reuters.