Over the last few weeks there have been many articles about what will happen to the US markets after the election on 3 November.
But the US economy is the biggest in the world and one of the most open. As such, what happens in the US will have a large ripple effect on other economies. As they used to say, when the US sneezes, the rest of the world catches a cold!
Whilst Republican presidents are often seen as good for Wall Street, Donald Trump has taken a confrontational and protectionist stand with respect to imports into the US. As well as tangible measures, Trump's aggressive rhetoric and unpredictability has had an additional significant negative impact on trade with other countries.
The main target for much of this has been China but other countries have been caught in the crossfire.
Countries like Singapore, Vietnam and South Korea are enmeshed in the supply chain centred on China – owning factories on the Chinese mainland, or supplying components or services to Chinese manufacturers.
As China has suffered, so have the economies of these other Asian countries. Mexico has been another target of Trump's measures and aggressive rhetoric.
With a Biden victory looking likely, the currencies of all these countries have strengthened over the last few weeks. Expect them to experience a more significant rally if Biden wins.
Depicted: Admiral Markets MetaTrader 5 - USDMXN Daily Chart. Date Range: 14 May 2020 - 28 October 2020. Date Captured: 28 October 2020. Past performance is not necessarily an indication of future performance.
Two currencies that will probably move in the opposite direction are the Russian rouble and the Turkish lira.
President Putin of Russia and President Erdogan of Turkey are both regarded as "bad boys" in international geo-politics. President Trump is known to admire these "strong leaders" and has ignored their actions in places like Syria, Ukraine, and now, Nagorno-Karabakh – behaviours that past US presidents would have tried to deter.
Both currencies have weakened in recent weeks in expectation of a Biden win and a tougher stand from Washington against Moscow and Ankara.
Depicted: Admiral Markets MetaTrader 5 - USDRUB Daily Chart. Date Range: 12 May 2020 - 28 October 2020. Date Captured: 28 October 2020. Past performance is not necessarily an indication of future performance.
The Turkish lira is currently trading at an all-time low against the US dollar, crossing the 8-per-US dollar line for the first time on the 26 of October.
Again, expect these trends to accelerate if Biden wins.
One other potential effect from the election might reinforce the rise of the first set of currencies.
If the Democrats end up in control of the presidency and both houses of Congress, we can expect a swift and decisive stimulus package.
Whilst this might be good for the US economy, it will probably be bad for the dollar and, thus good for other international currencies.
Trade Forex with Admiral Markets
If you are feeling inspired to start trading, you will be pleased to hear that with Admiral Markets you can trade Forex 24 hours a day, 5 days a week! Click the banner below to open an account and start trading today!
Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The analysis is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the Analysis.
- Each of the Analysis is prepared by an independent analyst based on the Author's personal estimations.
- To ensure that the interests of the clients would be protected and objectivity of the Analysis would not be damaged Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures that refer to any past performance is not a reliable indicator of future results.
- The contents of the Analysis should not be construed as an express or implied promise, guarantee or implication by Admiral Markets that the client shall profit from the strategies therein or that losses in connection therewith may or shall be limited.
- Any kind of previous or modelled performance of financial instruments indicated within the Publication should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- The projections included in the Analysis may be subject to additional fees, taxes or other charges, depending on the subject of the Publication. The price list applicable to the services provided by Admiral Markets is publicly available from the website of Admiral Markets.
Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.