-- Over the past month, significant changes in US politics have shifted market expectations, overtaking the influence of the Federal Reserve (Fed) on the US dollar (USD). Initially, it seemed that the USD had peaked, especially with cooling US economic data and the Fed preparing for an easing cycle.

The US Presidential election on November 5th appeared far enough away to let the Fed's actions dominate market movements.

However, recent political developments and increased odds in favor of Donald Trump have led the market to factor in this major event sooner than expected, analysts at Macquarie said in a note.

As a result, any Fed-induced USD weakness is now predicted to be brief and shallow, particularly affecting rate-sensitive pairs like USDJPY , which could drop to 142 by December, the analysts added.

Broad-based USD strength is anticipated, especially impacting currencies and economies vulnerable to a potential Trump presidency, such as the Chinese Yuan (CNY) and the Taiwanese Dollar (TWD).

Election Scenarios and FX Forecasts:

The Australian Dollar (AUD) could drop to 64c due to economic repercussions. The Euro (EUR) may fall to 1.06 by December and 1.05 by mid-2025 if global US tariffs and potential deeper cuts by the European Central Bank (ECB) materialize.

Other FX Themes:

Latin America: