US Election: Can Trump Steer the USD in the Right Direction?
Table of Contents
- Election Dynamics and Leadership Changes
- Legal Battles and Political Narratives
- Economic Policies and Market Reactions
- Impact on Currency Markets
- Global Trade and Market Sentiment
- Gold’s Role Amid Uncertainty
- What a Trump Presidency Could Mean
Election Dynamics and Leadership Changes
On Tuesday, November 5th, the American public will head to the polls to vote for the next president. Joe Biden, currently in office, recently announced he won’t be seeking a second term. Donald Trump, after losing the previous election to Biden, has the opportunity to run again.
Legal Battles and Political Narratives
With Kamala Harris now endorsed as the Democratic candidate, the race has been dubbed “Prosecutor vs. Prosecuted.” Harris, who served as the District Attorney for San Francisco before becoming Vice President, now faces off against Trump, who has been embroiled in legal battles. He was found guilty of falsifying business records and faced a dismissed case related to handling classified documents. Additionally, Trump faces four criminal charges, including conspiracy to defraud the US and conspiracy against citizens’ rights. Trump has appealed, claiming presidential immunity from prosecution. He maintains that the charges are politically motivated by the Biden administration.
Economic Policies and Market Reactions
Polls and betting odds currently suggest that Trump is leading, but the election’s outcome remains uncertain. The race largely depends on six battleground states—Arizona, Georgia, Michigan, Nevada, Pennsylvania, and Wisconsin—which Biden won in 2020. Trump is currently ahead in these states. Virginia, once a solidly blue state, has become unexpectedly competitive, with recent polls showing Biden’s lead shrinking to just three points after winning by 10 points in 2020. Additionally, Trump narrowly survived a shooting at a Republican rally, which has stirred further momentum within his camp.
Impact on Currency Markets
The election could significantly impact currency markets. Trump’s 2016 victory saw the US dollar strengthen as his “Make America Great Again” campaign prompted money to flow into the greenback. If Trump wins again, promises of tax cuts and regulatory rollbacks could spur economic growth and attract investment, further boosting the USD.
Trump’s policies of imposing economic sanctions and tariff hikes could hurt the currencies of nations he targets. Furthermore, his tough stance on immigration may put pressure on the labor market, creating short-term relief with tax cuts but also potentially fueling inflation. As a result, the USD could strengthen as the Federal Reserve keeps interest rates high for longer.
Global Trade and Market Sentiment
When Trump won in 2016, the dollar index (DXY) surged, peaking at 103.82, before falling sharply as tariffs and sanctions took effect. Over time, as the US economy stabilized, the dollar regained strength. Under a potential second Trump term, the dollar could once again rise due to policies supporting US growth, especially with the backing of the Republican Party. The strong dollar would help curb inflation, a key concern during Trump’s first term.
Gold’s Role Amidst Uncertainty
The S&P 500 sometimes reacts negatively to Trump’s policies, especially with rising tensions with China and challenges in bringing jobs back to the US. Tariffs on foreign nations can also hurt multinational companies, potentially affecting their sales.
However, gold may benefit from a Trump presidency. Any uncertainty or geopolitical tensions that arise from his leadership often drive investors to safe-haven assets like gold. Additionally, if inflation persists, gold’s reputation as an inflation hedge could push its value higher. During Trump’s first term, gold saw significant gains, rising from roughly $1,100/oz to $2,000/oz.
What a Trump Presidency Could Mean for the USD
With Biden no longer running for re-election, Trump’s chances of winning are looking increasingly likely. While his victory might lead to mixed outcomes for the stock market, both gold and the US dollar performed well during his previous term. Several new factors are at play in this presidential race, but Trump remains the favorite to win in November, which could see continued strength for the USD.
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