We expect the US dollar to strengthen whoever wins – National Australia Bank

National Australia Bank (NAB) Group Economics believes the US dollar is likely to strengthen irrespective of who wins the US election, given the switch from monetary stimulus to fiscal stimulus and the resulting steepening of the treasury yield curve is inevitable.

Key points

For markets, a surprise Trump victory would create volatility but we expect the US dollar to strengthen whoever wins. We do not expect the US election outcome to be a game changer for bonds but the emphasis on more government spending by both candidates suggests a shift away from monetary stimulus towards fiscal policy. This would help sustain the trend to higher yields and a steeper yield curve in US financial markets.