Analysts at Bank of Tokyo Mitsubishi noted that political risk is becoming an increasingly important driver for the foreign exchange market.
“The US dollar has rebounded sharply so far this month moving back towards its cyclical highs from earlier in the year as the likelihood of Donald Trump becoming President has nose-dived.
He has fallen well behind in the latest polls which are encouraging market participants to look beyond the US Presidential election on the 8 th November.
Needless to say the market could be in for a big shock if the polls are significantly underestimating support for Donald Trump.
The next key political event will be the Italian constitutional referendum scheduled to take place on the 4th December.
It poses downside risks for the euro and could already be contributing to recent euro weakness.”