Major banks have formally told clients to expect volatile currency markets in the aftermath of today’s U.S. presidential election, with the gap between buying and selling prices that determines the cost of trading expected to widen sharply if Republican nominee Donald Trump were to win.
As Reuters reports, the warnings issued by the electronic trading platforms run by the market’s largest player Citi and rivals Barclays and Goldman Sachs, seen by clients of the banks, have over the past two years become standard “red flags” ahead of big political and economic set-pieces.
But issued broadly for the first time since Britain’s vote to leave the European Union in June, they are also a measure of the scale of risks being attached to Tuesday’s vote.
Banks have forecast falls of up to 5% in the dollar’s value against the yen if Trump were to win and a bounce of 1-2% for the greenback on a victory for Democratic nominee Hillary Clinton.
A number of retail currency trading platforms have also already raised margins clients must hold against open currency bets for fear of sharper moves in the dollar and Mexican peso. One Goldman Sachs client said the bank told clients on Monday it would not accept new stop loss orders on the peso until further notice.
