Citi strategists reiterated their view on Thursday that the U.S. election will be “positive for the U.S. dollar,” while acknowledging that other factors could weigh in the coming months, such as Federal Reserve policy, recession risks and the global economic situation.

According to Citi, trade and tariff policy is expected to be the main driver of the USD’s bullish outlook related to the election. Specifically, the potential for tariff increases, especially those targeting China, is seen as a key factor that could support the dollar.

Strategists have pointed out that currencies such as the Chinese yuan (), the euro (), the Mexican peso (), the Taiwan dollar () and the Thai baht () are seen as particularly exposed to these risks.

However, the macroeconomic situation remains uncertain and other factors may have a greater impact.

Citi is presenting a number of election scenarios that have different implications for the dollar. A “red wave” scenario, in which Trump wins and Republicans take control of both houses of Congress, is seen as the most positive for the dollar. In this case, Citi expects a focus on improving the trade deficit through tariffs and potentially some fiscal expansion through further tax cuts and deregulation.

“Therefore, we believe this is a solid market premium for a red wave. However, we believe 5% is a ceiling on how much the USD could rally on election risk alone, given other factors currently affecting the USD,” the Citi note said.

The report also noted that market participants typically begin discussing election topics two to three months before the event, with the US presidential debates in September representing a key moment when markets begin to price in the election results more seriously.

Strategists are betting that any election-related USD gains will be priced in well before November, with the greenback likely to peak around that time.

“This means the election will be an event where the USD and its volatility will have to ‘sell the news,’” they add.

They also indicate that other factors will remain critical for the dollar in the coming months. Federal Reserve policy, particularly the path of interest rates, and broader macroeconomic conditions, including the likelihood of a U.S. recession, will weigh on the dollar in addition to election risks.

In addition, global economic changes, such as a slowdown in industrial production and economic problems in Europe and China, could also have an impact.