How the Upcoming U.S. Presidential Election Will Impact the Forex Market?
How will Brexit affect the British Pound?
September 6, 2020
The US has a bicameral political system, made up of the House of Representatives and the Senate – collectively known as the US Congress. House members serve for two years and there are 435 seats available – with all seats up for contestation every two years.
Senators serve for six years, and there are 100 seats available. Roughly one-third of the seats in the Senate are up for election every two years. There is currently no limit to how many terms a member of the House or Senate can serve.
The 2016 Election's Impact on the Forex Market
If you remember back to the 2016 presidential election, the U.S. dollar took quite a hit in the wake of current president Donald J. Trump's victory. With so many predicting that Trump's rival, democratic candidate Hillary Clinton, would be the one to assume office, the markets reacted with a predictably strong knee-jerk. When compared to the British Pound, the Euro, the Swiss Franc, and the Japanese Yen the day after the November 9th election, the U.S. Dollar took a real nosedive. This is comparable to what happened with the British Pound in the wake of Brexit earlier that same year. However, in the days, weeks, and months that followed the 2016 election, the U.S. Dollar saw a pretty tremendous recovery. By January of 2017, the U.S. Dollar was hitting its highest peak in over five years. Between February of 2017 and February of 2018, though, the U.S. Dollar again saw a sharp decline even more drastic than the one following the election. Things gradually recovered once more in the couple of years that followed, then tanked again in the wake of the onset of the novel coronavirus. While things never got as low as they did in 2018, they certainly dropped significantly (and have stayed low for most of 2020).
The 2012 Election's Impact on the Forex Market
Since the United States' 2012 presidential election was, in fact, a re-election, the market looked pretty different than it did in 2016 where both parties were presenting voters with different candidates than they'd seen in the previous election cycle. In spite of this, the impact of the 2012 election on the forex market could be very telling if President Trump happens to be re-elected. Additionally, the 2012 election was held in the wake of an economic recession, which is something that could potentially be in store for America (and many other countries, for that matter) following the coronavirus pandemic. In the wake of Barack Obama's re-election, a previously rocky and unpredictable market saw unprecedented growth and success. The U.S. Dollar rose at a rapid rate, skyrocketing upward from 2012 to the spring of 2015. Then, from March of 2015 onward (essentially for the length of the 2016 election cycle), the U.S. Dollar returned to that unpredictable rising and falling it had seen back before the 2012 election. These trends are important to keep in mind as we inch closer to the November election.
What This Means for 2020?
Now that we have a better idea of the kind of impact the 2012 and 2016 elections had on the forex market, it's time to run through a few scenarios for what might happen to the market here in 2020. It's been nearly thirty years since an American president has lost their re-election campaign, which means that — judging by former two-term presidents Bill Clinton, George W. Bush, and Barack Obama — it would really take a large turnout from the Democratic Party for President Trump to lose his seat. Should he succeed in achieving his re-election, we can probably expect the forex market to look like it did in 2012 — a steady, continual rise. Should Democratic Party candidate and former VP Joe Biden win, we can probably expect to see something more akin to what happened in 2016. Ultimately, these are only educated estimates based on past trends and nothing can be known for certain until the days, weeks, and months that follow this year's Election Day.
