How will the U.S. election affect the foreign exchange market?

Author: 4E Exchange

As the 2024 U.S. presidential election approaches, volatility in the foreign exchange market has noticeably intensified. The election results will not only affect U.S. policy direction but will also directly impact global financial markets, especially the currency market.

In recent days, volatility in the foreign exchange market has significantly increased, with the implied volatility of the euro against the dollar and the pound against the dollar reaching their highest levels since March 2023. Market participants are generally adjusting their foreign exchange strategies to cope with various potential outcomes. Different candidates represent starkly different economic policies and foreign positions, and their expected victories inject different driving forces into the market.

For example, if Republican candidate Trump wins, the market generally expects him to adopt a tougher trade policy. While such policies may stimulate U.S. economic growth and attract foreign investment, thereby boosting the dollar, their potential protectionist tendencies could also trigger international trade tensions, negatively impacting the dollar.

Conversely, if Democratic candidate Harris wins the election, the market may express concerns about her fiscal stimulus policies. Although these policies aim to promote economic growth, they could also lead to higher inflation and debt levels, putting pressure on the dollar exchange rate. However, if Harris can gain more support in Congress, her policies might also positively impact the U.S. economy, subsequently boosting the dollar exchange rate.

Currently, the implied volatility in the options market is rising, reflecting investors' high uncertainty regarding the election results. Many investors are using options trading for risk hedging, further driving up market volatility. Additionally, the election results will also affect the dollar's exchange rate against other major currencies, especially if Trump implements tougher trade policies, other countries may sell off the dollar, leading to its depreciation. In contrast, if Harris is elected and promotes international cooperation, it could benefit the dollar's international standing.

It is worth noting that, in addition to the election results themselves, uncertainties during the election process can also have a significant impact on the market. For instance, a tight election race may lead to high volatility, while the gradual implementation of post-election policies could bring about new market reassessments.

Overall, the impact of the U.S. election on the foreign exchange market is complex and multifaceted. Investors should closely monitor the election developments, timely adjust their strategies, and manage risks. During this uncertain period, a robust investment strategy and risk control are particularly important. As a one-stop comprehensive trading platform, 4E supports trading in nearly 20 currency pairs, including the dollar, euro, pound, yen, Australian dollar, New Zealand dollar, Canadian dollar, and Swiss franc, offering up to 1000 times leverage for long and short trading services, allowing investors to respond more flexibly to market fluctuations, trading anytime via mobile with just USDT.

In addition, as the official partner of the Argentine national team, 4E not only supports asset classes such as cryptocurrencies, stocks, indices, foreign exchange, and gold but also launched wealth management products with an annualized yield of up to 5.5% on USDT, allowing flexible investment with both demand deposit and fixed deposit options, ensuring funds are not idle while waiting for market changes, providing potential hedging choices for investors.