The current main factor determining the prospects of the dollar in the global currency configuration is the debate between Trump and Biden, since both candidates assume different scenarios if they win the elections.

Biden's likely victory will be seen by markets as a signal for a weaker dollar, as he will make efforts to curtail Trump's economic initiatives and try to return to the model of globalized governance, which will eliminate the barriers to international trade that Trump has so carefully built in.

In turn, Trump will get a chance to complete what he started. Throughout his term, he implemented the idea of eliminating injustices in world trade, in which the United States supplied liquidity and democracy, and received goods in exchange. This policy led to a strong imbalance in the trade balance, and so, Trump, from the very first days of his presidency, undertook to correct trade relations with those countries with a likely negative balance.

Japan was the first to come to terms just a few months later. The Cabinet agreed to invest in the US economy an amount equivalent to an annual deficit, that is, more than $200 billion.

Meanwhile, Canada and Mexico resisted for 18 months during negotiations to renew the NAFTA agreement, but still conceded on most points. As part of this agreement, US manufacturers received significant preferences.

China and the US economic conflict, on another hand, is still in full swing. China holds most of its strategic positions, despite a number of serious concessions.

However, nothing was gained in the end. The US trade balance has gone further into negative zone for 4 years, and there has been no improvement in the balance, if we exclude oil and oil products from it, and is in a much worse state than during the 2008/09 crisis – the monthly updated schedule of the Federal Reserve of Richmond is just about this.

Moreover, we add a $3.1 trillion budget hole "due to the pandemic" (as the CBO informs, the deficit has already reached 15.2% of GDP), and a pullback in the labor market after volume was reduced by 50% last April.

If you bring two scenarios for the election results to a few phrases, Biden's growing chances to win the election leads to a decline in the VIX index and the weakening of the dollar, while the news in favor of Trump, leads to a strengthening of the dollar and an increase in demand for defensive assets. This is the way to view news from the political front.

On another note, macroeconomic indicators are ignored.

EUR/USD

The key word at the EU's meeting last September, following the minutes published yesterday, was "uncertainty", which was found in the content as much as 23 times. The ECB's position is reportedly that more information in the coming months will help shape policy direction. However, months are too long to be in such a long period of uncertainty. Nevertheless, the ECB sometimes turns to specifics, which suggests that the uncertainty will be significantly less after the US elections, and will announce additional mitigation measures at the December meeting.

These measures are expected to include a €500 billion expansion of the Pandemic Response Program (PEPP), an additional expansion of good old TLTRO, and easier access to TLTRO.

P. Lane, ECB's Chief Economist, notes that there are risks of deterioration in medium-term price stability. To simply put, this means serious concerns about a further slowdown in inflation, which indicates that providing additional liquidity is already settled.

For the euro, this means that the prospect of increasing bearish pressure opens up.

At the same time, the dynamics of the futures market will show a much more accurate forecast despite the fact that opinion polls give Biden a slightly better chance.

The weekly CFTC report will be published tonight. A further reduction in the euro's long position is expected, which will lead to the final formation of a local high and the beginning of a strong decline.