Executive summary

Short-term (<3 months) view

Source: Tradingkey.com

Medium-term (3-12 months) view

Source: Tradingkey.com

1. USD Index

On October 29, we released a report titled The Impact of the US Election on Major Asset Classes, which identified Trump as the frontrunner in the upcoming general election in early November. Based on our baseline scenario, we adopted a bullish outlook on the USD Index. Since the report's publication, the dollar has appreciated by 2.4%. Among the index components, all currencies have depreciated except the Japanese yen (Figure 1.1).

Figure 1.1: USD Index and components

Source: Refinitiv, Tradingkey.com

Note: Component currencies are rebased on 29/10/2024 = 100

Following Trump's election, market sentiment has shifted, with investors increasingly concerned that his policies could spur re-inflation. Although the Fed is expected to cut interest rates by 25bp at the upcoming Federal Open Market Committee (FOMC) meeting in December, the trajectory of rate cuts in 2025 may be slower than previously anticipated. Meanwhile, the recent