Investing.com — The growing prospect of a Democratic victory is forcing investors to pull back on “Trump deals” including the dollar bid, Macquarie says, as Democratic presidential candidate Kamala Harris continues to generate more “Kamala-mentum” in the race for the White House.

“We believe the Democrats’ improving chances of winning the presidential race have driven down the ‘Trump trade’, including a rise in the USD,” strategists at Macquarie said in a note on Tuesday as the stock continued to weaken.

A powerful dollar and a potential Trump election victory have become closely linked because the former president’s proposed major policies, including tax cuts, immigration restrictions and tariffs, “could be seen as more inflationary, which would keep interest rates higher,” they said.

The strategist adds that if Harris is successful in outlining her agenda at the Democratic National Convention this week, there could be even more pain for the dollar next week.

“A rise in support for Kamala Harris in polls following next week’s convention could further weaken the dollar,” they added.

The “Kamala-mentum” that erupted after President Joe Biden stepped down and Harris endorsed was due to “more effective [campaign] than the one led by President Joe Biden.”

Harris’ quick rise to the top Democratic post also caught Trump’s team by surprise and gave them “fewer opportunities to attack Harris than they did with Biden,” Macquarie said.

“Once Trump’s attacks were neutralized, the level of enthusiasm among his electorate has likely also decreased,” it added.

However, political issues aside, the dollar’s ​​weakness since early August is puzzling, says Macquarie, because recent economic data, including retail sales, initial jobless claims and ISM services, “have pointed to renewed relative strength in the US, following recession fears in late July and early August”.