The US presidential elections have global implications that affect the financial markets. Traders often consider this period as a time of volatility and opportunity.

Check out which markets receive the most impact so you can prepare your trades.

Forex

One of the most directly affected by presidential elections is the forex market.

In the US, while the Federal Reserve is independent, the sitting US president can still exert political pressure on the Federal Open Market Committee (FOMC) to get the monetary policy that aligns well with their vision.

EUR/USD

The global sentiment on candidates and the eventual winner directly correlates to the perceived strength of the country’s currency. US candidates appearing weak can cast doubts on the future of the dollar. For instance, the general consensus right now is that a Trump return would result in a lower dollar and a rise in EUR/USD.

The policies proposed by presidential candidates can significantly influence the EUR/USD pair. For example, expansionary fiscal policies might strengthen the USD, causing the EUR/USD to tumble.

Elections bring uncertainty, leading to volatility in EUR/USD as traders react to the latest polls and candidate statements. Take note of the dates above to plan your trades.

GBP/USD

The election outcome can shape US-UK relations, impacting trade agreements and economic policies, thus affecting GBP/USD. With the US president having a direct hand to play in international relations, UK-leaning candidates can cause GBP to strengthen.

Other USD pairs

Other currency pairs involving the USD respond to changes in global perception of the dollar, which can be influenced by election outcomes. If the US presidential elections are boosting investor sentiment on the dollar, forex pairs with USD as the base currency, i.e. USD/JPY, are likely to increase. Meanwhile, currency pairs with USD as the quote currency, i.e. EUR/USD, will likely decrease. The opposite holds true if the elections go sideways and investors choose to abandon the dollar.

US stocks

The US presidential elections can significantly affect various sectors of the stock market based on the policy suggestions of the candidates.

Healthcare sector

Policies related to healthcare reform or pharmaceutical regulations can impact healthcare stocks. A candidate favouring stringent healthcare regulations might lead to a decline in pharmaceutical stocks.

Energy sector

Proposals regarding the regulation of renewable energy or fossil fuels can lead to market volatility on energy stocks. A candidate promoting green energy might boost renewable energy stocks while potentially negatively impacting traditional energy companies. This may also affect commodities, such as WTI and BRENT.

Technology sector

Tech stocks may be influenced by policies regarding data privacy, antitrust issues, or trade relations with countries important to tech supply chains.

Proposals regarding international trade, especially with tech-heavy regions like Asia, can have a significant impact. For instance, a candidate proposing strict trade policies or tariffs could lead to volatility in tech stocks, affecting companies reliant on global supply chains. Additionally, policies around data privacy and cybersecurity can influence investor confidence in tech companies, particularly those handling large amounts of user data.

Financial sector

The financial sector is sensitive to proposed changes in banking regulations and fiscal policies. A candidate advocating for tighter financial regulations may negatively impact banking stocks, as increased oversight could lead to higher operational costs.

Conversely, proposals for deregulation or tax reforms could boost investor sentiment in financial stocks, as these changes could potentially increase profitability for financial institutions.

Global stocks

The policies of the US administration can influence international trade, economic policies, and geopolitical stability.

The stance of the US on trade agreements can affect global markets. Protectionist policies might lead to trade wars, impacting global supply chains and the stock prices of companies reliant on international trade.

The fiscal and monetary policies proposed by candidates can influence global economic growth, which in turn affects global stock markets.

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