Clinton victory with Democratic majority will lead to USD outperformance - Nomura

Research Team at Nomura, suggests if Clinton wins with Democratic majority then this outcome is likely to lead to USD outperformance.

Key Quotes

“We assume US yields to face upward pressures, while negative reactions in US equity market are likely. The magnitude of equity price declines is likely smaller than Trump victory scenario though.

The estimate shows GBP and commodity currencies are likely underperformers under this scenario. The combination of higher US yields and equity price declines is similar to our assumption made for global steepening with risk off. The result then showed underperformance of commodity currencies and GBP are likely in the G10 FX space, under the combination of higher global yield with risk off. Thus, GBP weakness and commodity currency weakness under this tail risk scenario would be reasonable.

Low yielders (e.g., EUR, CHF, SEK, and JPY), are estimated to weaken less against USD. If risk sentiment holds strongly, these currencies would weaken more after higher US yields, but expected negative reactions of US equity offset the impact of higher US yields, in our view.”