Promises of job creation, national debt reduction and the creation of a strong national economy are more often than not the bedrock of election campaigns by politicians bidding for elected positions. However, the lack of conviction surrounding the November 3 U.S Presidential Election between the Republican candidate, President Donald Trump, and Democratic candidate Joe Biden, could have a consequential impact on the U.S. Dollar, especially with the predicted rise in mail-in voting as a result of the ongoing global pandemic which means the winner will not be announced immediately until after two to three weeks, and coupled with the fact that Trump has refused to outrightly rule out contesting the result should Biden win, which could result in a constitutional crisis.
Economic analysts have stipulated that the USD could depreciate if Biden wins because he would likely discontinue most of the policies put in place by Trump which have supported the dollar strength. These include the protectionist trade policy, White House influence over the Federal Reserve, a loosening of regulation on the financial and energy sectors, and fiscal austerity to reverse the country’s economic slide, instead, he will be focusing on restructuring international accords by addressing any unfair trade or economic ties with other countries of the world especially China.
Although history suggests that the USD will strengthen in the first 100 days, regardless of who comes out victorious once the result is announced judging from the last nine out of ten elections since 1980, Investors should prepare themselves for a period of the high volatility of the USD considering different elements that have applied pressure on the currency among which are the Federal Reserve’s ongoing commitment to near-zero interest rates, the rising debt-to-GDP ratio, and the continuing detrimental impact of the pandemic on economic activities.
Author: Francis Idowu
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