How to Trade With US President Elections?
The US presidential elections bid very diverse candidates for voters and also for markets. The polls, which are acutely close, are previously left, front and center for the financial world. This Big Event you need to know for: a rapid background check, anticipated currency reactions, the run-up to the results and the demanding time-chart of the election night.
Let’s Begin: 2016 US Election: Rapid Background Check
A million of content have been spilled on the campaign which is a never ending one, and we’ll bat to the basics. Markets generally prefer Republican presidents as these support pro-business, pro-market policies but this election is very different.
The Republican nominee was Donald Trump offers an Anti-trade, populist stance and an economic plan where the figures don’t add up. Also, he has no political background and a very bizarre behavior. The level of volatility is huge.
The next one was Hillary Clinton is a humdrum, mainstream candidate who has her political baggage but is view as a continuation of the political situation now, specifically as she will probably face a Republican House. Her new adoption of little bit anti-trade is not accepted by markets, and her economic policies don’t stable outlandish.
It’s Clinton Continuity vs. Donald Interruption
Currencies Impact for FOUR groups
Backlashes of stock markets to the polls have been straightforward: they hike with Clinton and fall with Trump. With currencies, it’s little bit more complicated. The US dollar leads with Clinton and drifts with Trump, but there are differences between disparate currencies. Initial and foremost, it is significant to note that the impact is not symmetric: a Clinton victory is deep from being priced in but is yet the more likely picture and represents continuity. A win for Trump is yet the less-likely picture and represents volatility.
And, there is always the chance of a contested election: it may be similar to the 2000 showdown between George W. Bush and Al Gore when the state of Florida was settled by 537 votes. Even on a large margin, we might not receive a concession speech. Any important uncertainty or recount might trigger an equal reaction to a Trump victory, as both represent volatility.
The clearest reaction has been across the safe-haven currencies: primary and foremost the yen, and also the Swiss franc return to its role, while the ever-present risk of an SNB intervention to soften the franc. So, the USDJPY and USDCHF, rally with Clinton and descent with Trump. This is a steady reaction that has a huge probability of continuing on this election night.
The 2nd group of currencies: AUD, NZD, and CAD. The reaction has been blended and somewhat less influenced by the elections. Still, everything is about the elections currently, and these are risk currencies. These commodity currencies are currently moving up with Clinton and running down with Trump and this will likely constant.
Or else, the greenback falls across these currencies with Clinton and jumps higher against these currencies with Trump. The most ACCESSIBLE currency on a Trump victory is the Canadian dollar, due to a potential decline of trade relations.
Major Currency of EUR & GBP: Depending on the Results
The 3rd group is more difficult: the Euro and the Pound. So far, the euro traded with the yen and the franc, gaining with Trump and falling with Clinton, copying the safe-haven behavior it had back in 2015. The pound has been in its own creation, as Brexit relevant issues such as the court ruling and BOE policy has a huge impact, but generally followed the euro, yen,& franc - rise with Trump, down with Clinton.
Yet, there is a fair reason to consider that the euro and the pound will follow most currencies on a Trump victory and cut down against the US dollar. Both EUR and GBP are NOT typical safe-haven currencies and might fall in reaction to such an act. The US dollar will still lose out to the yen and the franc, but neither to the euro nor the pound on a Trump win.
The Different options:
The fourth group is two more “exotic” currencies that have been in the news when the elections are discussed. The Mexican peso has been vulnerable to Trump advances and rallied with Clinton, due to Trump’s promise of building a wall on the Mexican border. This behavior could continue. On the other end of the spectrum, the Russian rouble could gain on a Trump victory, as the Republican candidate is an admirer of Putin, and fall if Clinton wins. Trading the RUB is riskier than the peso.
If Clinton wins: USDJPY, USDCHF up; EURUSD, GBPUSD blended or a bit increase; AUDUSD, NZDUSD rise, USDCAD cut down.
If Trump wins: USDJPY, USDCHF fall; EURUSD, GBPUSD, AUDUSD, NZDUSD decline, USDCAD surely move higher.