On 5 November 2024, the Republican and Democrat Presidential nominees will come face to face in order to get the required 270 electoral college votes to become the next President of the United States.
The Democrats’ campaign will commence with their first primary in South Carolina on 3 February. On 5 March, we have “Super Tuesday” which is the date where we will have 31 primaries (across both the Republicans and Democrats side) in one day. Analysts expect this day to mark the point where market interest will increase. After “Super Tuesday”, the next crucial dates would be the party conventions where the presidential nominee will be announced: 15-18 July for Republicans and 19-22 August for Democrats. A series of televised debates will bring us into the 5 November election.
A tight battle between Trump and Biden
Donald Trump is anticipated to win the Republican nomination in primaries in the coming months and face Democrat incumbent Joe Biden in a tight battle. A Trump-Biden rematch, with heated rhetoric and the potential of social conflict, could impact on investor sentiment. It could affect consumer sentiment and hurt stocks as investors become more cautious over U.S.-China tensions. Trump favours higher tariffs which would push inflation higher, increase the dollar and hurt the yuan, euro and Mexican peso. Spending cut promises by either party could upset a complex US bonds trade that speculates that government debt will increase.
JPMorgan analysts expect the dollar to strengthen
JPMorgan analysts anticipate that the 2024 US presidential election which may see President Joe Biden combating former President Donald Trump, will boost the dollar’s status, driven by the prospect of a trade war. JPMorgan’s foreign-exchange strategists, Meera Chandan and Patrick Locke highlighted Trump’s protectionist policies and the influence on currencies due to potential trade tariffs. As they said, “Renewed tariff risk will be dollar positive.” The potential expansion of tariffs to Europe, Mexico, and broader Asia could significantly push the dollar higher. Such an expanding trade war will affect pro-cyclical, growth-sensitive currencies. They noted that a universal 10% tariff could lead to a 4-6% boost in the greenback’s trade-weighted value.
Bank of America analysts expect volatility in currency markets
Uncertainty about the election has already affected global currency markets. According to the Bank of America (BofA), Democratic presidents tend to boost the dollar, while Republicans tend to weaken the greenback. They noted that the upcoming US election will define American policy, and could also affect how other currencies perform, including the Japanese yen. For example, Democratic presidencies have seemed to weaken the yen against the dollar, whereas Republican administrations tended to strengthen it. The global foreign exchange markets are focusing on the election, and volatility will continue to increase among currencies such as the euro and Mexican peso.
How should businesses respond?
One thing is sure, and this is that nobody knows for certain where the markets could go next. Uncertainty and volatility can have both a negative and positive effect on a company’s bottom line, particularly where there is an exposure to the US dollar. With expert guidance from Universal Partners FX, you will be able to navigate financial uncertainty so you can stay focused on running your business.