While the market is currently considering very little uncertainty into the upcoming U.S. presidential election, both Hillary Clinton and Donald Trump are likely to raise the value of the dollar, according to one analyst.
David Woo, head of global rates, FX and EM FI strategy at Bank of America Merrill Lynch, told CNBC that the "market is not even thinking about this U.S. election." But, he added that if any opinions were to be discerned, the "market has already decided Trump is going to lose (the debate) tonight."
Woo pointed out that "if you look at interest rate volatility, it has never been this low," which was ironic as he considered the current presidential race to be the "most interesting 30 years."
According to Woo, the market is expecting a Clinton victory alongside a split Congress. He explained that this would equal "four more years of gridlock" and "continued policy paralysis." "This is the reason why the market is thinking that this (election) is going to be a non-event," Woo argued.
However, Woo warned that "the U.S. could be one shock away from the next recession," and this would mean that the U.S. Federal Reserve "is going to have no choice but to basically keep rates lower for longer."
Woo also argued that if "Trump were to win, the dollar would do extremely well." A "Republican clean sweep" would result in a "massive loosening of fiscal policy," with the new president doing whatever was needed to revive U.S. economic growth.