US Election to cause Major Volatility on the Markets (Daniel Johnson)

Pound to Dollar Rate Extends Gains on Mixed US Data

The impact of the US election on the currency markets

The US election will have a major impact on the currency markets, with results expected in at around 4am. I would expect the markets to react in a less volatile fashion if Hilary Clinton is to gain power as she is seen as the safer bet for the US economy. Janet Yellen the head of the Federal Reserve indicated at the end of last year there could be as many as four interest rate hikes during 2016, none of which are yet to materialise. Although the FED are meant to act as a separate entity to the government I can’t help that think an interest rate hike has been put on hold due to the uncertainty surrounding the US presidential election.  If Clinton gets in it would bring some form of stability to the US economy and a rate hike in December would be far more likely.

Although Trump is the current underdog, the election is far from a foregone conclusion. If Trump gets in I would expect big swings in value for the US Dollar. His outlandish ideas if implemented will have major implications on the world economy. He has stated his intentions to cut trade levels with China which potentially could wipe trillions off both country’s GDP. I hate using the word trillion, it reminds of school ground exaggeration, but on this occasion it is justified. He also managed to wipe 10% of the Mexican Peso due to his views on immigration and he hasn’t even got into the oval office.

Possible outcomes for Major  Currency Pairings<

Pound to US Dollar

In Event of a Clinton Victory

Expect USD to gain further ground on the Pound. Not large gains as I think this is factored into the market to some extent.

In Event of a Trump Victory

Expect the US Dollar to weaken considerably, this may be a small window of opportunity for US Dollar buyers as further Brexit concerns will no doubt weaken Sterling in the near future.

Euro to US Dollar

EUR/USD is the most frequently traded currency pairing in the world. Expect volatility.

In Event of a Clinton Victory

Expect Dollar strength as investors flood the US Dollar as a safe haven investment.

In Event of a Trump Victory

Expect the US Dollar to weaken significantly. The Euro is currently in a fragile position  due serious underlying problems such as the Greek debt crisis, Italian Bank’s bad loans in excess 0f €360bn, shocking inflation levels and the threat of further referendums. If you are buying US Dollars it would be wise to take advantage of this possible outcome.

Pound to Australian Dollar

In Event of a Clinton Victory

If Clinton wins expect the Aussie to fall quite sharply in value as investors leave the riskier Aussie for the safer bet of the US Dollar as stability is returned to the US economy.

In Event of a Trump Victory

Expect the Australian Dollar to jump in value. It may well be one of the first picks for investors along with the New Zealand Dollar due to the high levels of interest available.

If  you have a currency requirement it is vital to be in touch with an experienced broker. The timing of your trade is crucial during such volatile times, If you have seasoned broker on board he/she can keep you up to date with what is happening in the market to help you make an informed decision. I will be happy to help you personally. If you inform me of the the currency pair you are trading, volume and time scale and I will provide a free strategy to suit your needs. I work for one of the top brokerages in the country and  I am in a position to better virtually every competitors rate of exchange. You would also be looking at saving anything up to 4% in comparison to high street banks. Please do get in touch by contacting me at [email protected]. Thank you for reading my blog.

Daniel Johnson

Executive Dealer – Foreign Currency Direct PLC