020 7898 0500
Has Kamala Harris's entry into the race changed the outlook for the US dollar? Editorial credit: Rokas Tenys, via Shutterstock
The worst kept secret in Washington — that Joe Biden is getting on a bit — finally burst out into the political mainstream last month. The public, it should be noted, had been saying this for some time but the Democrats nonetheless had their lightbulb moment under the glare of CNN’s Atlanta studio.
After a brief period of resistance, Joe Biden decided to make way for a different candidate. That candidate will most likely be Kamala Harris, his vice president, who was forced to shut down her first shot at the 2020 ticket early on in her campaign.
Biden’s decision was magnanimous, but it opened up a number of questions. Would Harris fare better at her second run for president and what does the new matchup mean for the US dollar? We take a look in today’s blog.
What’s at stake?
An article published in the Financial Times before the debate fiasco claimed that the US dollar’s fate would be decided by this election. The US electorate have a stark choice to make in many policy areas, but that decision will no doubt have a massive impact on currency rates.
Economists have highlighted Trump’s protectionist policies as broadly positive for the US dollar. This is because it is presumed that imposing massive tariffs on goods from China and elsewhere would lead to a uptick in inflation and therefore less aggressive action from the Federal Reserve on interest rates.
As for Harris, currency markets will be looking further down the campaign trail to scrutinise her policy commitments in detail. For the time being, there is an expectation that her decisions will align with those of her predecessor, with focuses on infrastructure investment, strategic foreign aid and welfare programmes.
Both paths are speculative at this point. What is clear is that each candidate represents a fork in the road for the US dollar. Markets will be on high alert from here until November. Expect volatility, kneejerk reactions and the odd irrational move sprinkled in.
Narrowing the gap
Polling conducted before Biden dropped out the race showed Trump leading in overall voting intention. Crucially, that lead extended to a number of swing states that could decide the election. One of the foibles of the US electoral system is that states like Wisconsin, Georgia and Pennsylvania have an outsized power in choosing the next president. Securing a majority in those states is key to winning the election.
Pollsters have been scrambling to survey the mood of the nation after Biden’s decision. The data is still raw, but it points to a surge of enthusiasm for Harris, mirroring the rapid mobilisation of campaign contributions and volunteer registrations across the Democratic party.
However, if the Democrats are expecting to glide to victory on a wave of optimism, they are likely to be mistaken. Donald Trump has faced criminal charges and scandal and come out the other side stronger. His supporters will likely mobilise and turn out to vote in massive numbers. In most initial polling of a Trump vs Harris matchup, Trump still secures enough support to win the electoral college.
Make no mistake — this will be a close election that may come to just a few thousand votes across the battlegrounds.
Don’t let this election disrupt your profits. Speak to the experts today to see how you can protect your budget from currency risk.
Call 020 7898 0500 to discuss a forward contract; alternatively, if you’re new, please register with Smart Currency Business today.
