The US election results will clearly determine the direction of US fiscal policy. Trump’s victory is widely expected to augment the immense U.S. budget deficit by more than Harris’ deficit, although its size will also clearly depend on the composition of Congress, notes Jane Foley, senior currency strategist at Rabobank.

Trump means the Fed will end its cycle of cuts by February

“In Rabobank’s opinion, Trump’s victory may mean the end of the cycle of Fed interest rate cuts by January. This suggests better prospects for the USD next year, which will likely be further boosted by the red wave. “After 2025, the inflationary effects of trade tariffs will complicate the damaging impact they are likely to have on economic growth in the U.S. (and beyond).”

“A Harris victory in the US elections could also increase the US budget deficit, although a divided Congress could limit changes in fiscal policy and leave the cycle of Fed interest rate cuts in place. “As such, a Harris presidency is likely to trigger a dollar sell-off in the near future, although the outlook for 2026 is less clear.”

“We will be reassessing our USD forecasts after the US election results. Either way, we remain in favor of buying AUD/NZD on the dip, although the less dovish Bailey on November 7 could trigger some upside in the GBP/AUD parity. The eurozone is trying to regain fiscal prudence, which should reduce inflation headwinds for the ECB. Assuming risk appetite continues, we also see upside potential for AUD/EUR towards 0.62.”