With less time remaining until the U.S. presidential election, macroeconomic data are fading into the background. A typical example was the GDP report for Eurozone countries. While growth in Ireland and Belgium in the third quarter didn't impress investors much, the recession in Latvia drew their attention. This fact catalyzed EUR/USD's return to a bearish trend. Sellers just needed an excuse!

Eurozone Countries' GDP Trends

In 2016, Donald Trump's chances of winning the presidency were one in three; now they're two in three. His policies haven't changed much: the Republican still focuses on tax cuts, deregulation, tariffs, and immigration restrictions. But in 2024, he's more determined, and his plans are more ambitious, causing considerable concern.

According to BlackRock, global economies are experiencing the highest level of embedded inflation in decades. Under these conditions, aggressive rate cuts by central banks are unlikely. A key difference between Trump 2.0 and Trump 1.0 is the higher prices, as evident from the U.S. Treasury bond yields.

U.S. 10-Year Bond Yield Trends

If Trump's ideas weren't as damaging to the global economy after 2016, they could be now. Large-scale fiscal stimulus and trade wars would drive up national debt and disrupt supply chains—a perfect setup for accelerating inflation. Theoretically, the Federal Reserve must keep the federal funds rate steady or resume monetary tightening.

How does Trump plan to address this? Will he again label Jerome Powell as "America's enemy number one"? Will he consider currency interventions like the 1985 Plaza Accord? Or aim to take control of the Fed? That approach would dangerously mirror last year's scenario in Turkey, where the president and the central bank he controlled fought high inflation by lowering rates—problems Turkey still hasn't resolved.

Turkey isn't the U.S., and the scales are vastly different. The global economy could face serious trouble if Washington follows Ankara's path. Thus, who occupies the White House matters, but so does which party controls Congress. A "red wave" would allow Trump to reshape international trade, but if the Democrats hold legislative power, Trump trade supporters may start cashing in their gains.

HSBC notes that market movements before and after the election could drastically differ, with investors closely watching fiscal policy and import tariffs.

Technically, on the EUR/USD daily chart, the bulls' inability to realize the 1-2-3 reversal pattern shows their weakness. The bears have regained the initiative, and targets for previously formed shorts at 1.071 and 1.060 are getting closer.