How will the US election 2020 affect the Forex Market?

The US presidential election 2020, which is going to be held on November 3rd, is one the most awaited events of this year. ‘Will it turn to be a memorable event or a game changer?’ is one of the questions that is been running in the minds of every resident of the US, as well as the investors & traders all over the globe.

The US election has a direct influence on the Forex market

This presidential election has a great bearing on the US economy and also has a significant influence on the USD itself. Not only the US residents, but people around the globe are interested in the economy of the country, as it is directly proportional to the US states dollar.
When one category of people (probably the residents of the US) is pondering on,
‘How the direction of the country will change?’
‘Whether it is the Republican incumbent President Donald Trump or Democrat former Vice President Joe Biden?’
There is another category of people (the Investors and Traders from all over the globe), who are expecting instabilities in the marketplace & sharp volatilities until the election results are published.
This election has drawn very little attention when compared to ordinary times. Because, the country faced huge consequences due to the Covid-19 pandemic. With all eyes & minds on the downfall of the US economy & other internal affairs, the impact of the 2020 elections on the Forex market seems to be underrated.

How different policies might affect the Forex market?

All the USD pairs are expected to show greater volatility around the election time. The comparisons made between the economic policies of the Republicans and the Democrats show that, Generally, the democrats implement policies that aid in the economic growth of the country, which in turn appreciates the US dollar value.

While the Republicans want the US dollar value to depreciate in order to make the US exports more competitive.

Hence, in precise we can see that the US election results might have a direct impact on the Forex market, which in turn may affect the US dollars.

How different policies might affect the Forex market?

All the traders and investors are aware of the fact that uncertainties will exist until the election occurs. In order to reduce the tension, the market historian ‘Yale Hirsch’ in the year 2004, came up with the idea of predicting the election results, thereby indirectly predicting the market trends using the four-year presidential cycle.

The performance of equity of all four presidential years is taken into consideration. The appreciation of equity in four years accounts for a healthy economy. Popular explanations read that, the implementation of successful policies, a new administration that stimulated changes are the reasons for the reduction in uncertainties faced by the market.

But there is no assurance that the previous election pattern will re-occur. Thus, the Presidential election cycle can be viewed as an oversimplification. At the end of the day, we understand that the appreciation/ depreciation of the US dollar is not just dependant on the election but rather dependant on so many other factors.

So, let’s wait and watch how the market responds to the US election 2020.