United States Presidential Election’s Effect on the Forex Market

Tuesday, November 6, 2012 marks the date of one of the most critical elections in world history.

The greatest nation on the planet, the United States of America has found itself over 16 trillion dollars in debt. President Barack Obama is running against Governor Mitt Romney for the Presidential Position and recent presidential debates have heated up the competition.

We can’t blame the government for all of America’s issues and we certainly can’t expect the government to fix them all either. The government’s role is to protect, not provide.

As we look to the upcoming election day, we must be aware that it can make a substantial impact in the Forex market. When I say this, I’m not referring to a reaction necessarily determined by who the victor is. I’m not trying to say that if Barack Obama is elected, the Dollar will rise. Or, if Mitt Romney is elected, the dollar will rise.

Whoever is elected is going to have a lot of weight added to their words. More than ever, people will cling to what they say because of the affirmation of the majority of the United States.

After an election, there can be a renewed sense of hope and freshness. In history we see that since the election of 1976, there have only been 2 election years that stocks fell. The year 2008 was one of them because of the financial crisis.

Though the outlook for the U.S. dollar is arguably positive at the current time , there is certainly political uncertainty in the air. The thing about uncertainty for the U.S. Dollar is that: uncertainty attracts people to the Dollar! This can be referred to as Risk Aversion.

Since the U.S. Dollar is a “safe haven” currency. Investors run to it’s safety in times of uncertainty. This, in turn, adds more strength to the Dollar.

Recently we have seen incredible U.S. news. Building Permits are at a four year high, the unemployment rate is the lowest in approximately four years at 7.8%, and consumer sentiment is at it’s highest since 2007. On top of that, jobless claims are decent, durable good orders had a 9.9% jump in September, and retail sales are picking up. As the market digests this news and the election information, I think the U.S. Dollar has a good chance of being bullish this quarter.

I think that the direction of the United States Dollar also somewhat rests on whether or not the Fed adds more money to the quantitative easing plan. Another note, Mitt Romney and his VP Paul Ryan are strongly against QE3.

If President Obama would happen to remain President, the Fed may have an easier time moving forward with their current monetary policy. If Romney wins the election, the current monetary policy would hopefully not continue.

In conclusion, as we move closer to the election, I’d encourage you to be more alert and more careful as you participate in Forex Trading.

Please leave any thoughts you have by commenting below.

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