This 2016 presidential election special update is by Natalie Ciavarella, corporate dealer at World First USA, Inc.
With the election fast approaching, tensions are rising as polling margins thin.
Hillary’s camp fell on rough times last Friday when FBI Director James Comey uncovered new emails that “appear to be pertinent” to the investigation that he closed in July. Although it is unclear if any classified material were involved, it has renewed doubts about Clinton’s trustworthiness among the electorate, bolstering Trump’s prospects in the polls (more here).
Investors are broadly pricing in a Clinton victory, skewing risks to the side. A Clinton win isn’t likely to spark dramatic changes in investor sentiment. Trump’s proclivity towards protectionist policies could alienate our largest trading partners and negatively impact economic growth in the US. This could bring the dollar down with the economy in the longer term; such fears caused the pound to lose 18% against the USD following the surprise vote for Britain to leave the EU.
There are many parallels between our election and that of the Brexit vote, however the initial impact to financial markets may be completely different. The initial shock of a Trump victory would upend the markets, forcing traders to unwind their current bets. We could actually see a stronger US dollar initially as emerging markets suffer the brunt of renewed risk, a dynamic that typically supports safe havens like the dollar. A Clinton victory, shifts focus back to central-bank policy with all eyes on the Federal Reserve meeting on December 14th.
Either way, a Trump win means uncertainty for the dollar.
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