US ELECTIONS AND THE GREENBACK

In less than a fortnight, the Iowa caucus and New Hampshire primaries will mark the start true and proper of the Democratic and Republican primaries for the US presidential election on 3 November. Clearly this year’s major political event, the US presidential election is closely watched by investors and could have a significant bearing on the markets. In light of the weight of political factors on investor expectations, we first examined the dollar’s performance during the last twelve US elections to determine what, if any , trend was discernible during the election campaign, and then in the six months that followed the elections. W e then looked more closely at the 2020 presidential election and the possible effects on the currency market. While Donald Trump’s nomination as the Republican candidate makes little doubt, there are uncertainties as to the candidate who will represent the Democratic Party. The outcome of the Democratic primaries could have a significant impact on market expectatio n s on account of what are perceived as the less business-friendly economic programmes of certain candidate s , such as Bernie Sanders and Elizabeth Warren. Generally speaking, what we observed was that the US dollar tended to appreciate further following the election of a Republican president. In particular, if the pendulum swings from the Republican to the Democratic camp, this would have a particular ly significant impact on the US dollar if the Democratic candidate is a so-called Progressive, i.e. Bernie Sanders or Elizabeth Warren.