The Forex Market and Presidential Terms

(1) The US Dollar and the President’s Party
At first, many traders are surprised to learn that there is rarely a direct, straightforward relationship between the President and forex market performance. But considering that the President represents just one branch of the US government, every currency pair involves (at least) an entire other country’s government, and that many of the most important market developments (cough COVID-19 cough) are entirely outside the control of a single politician, it starts to make more sense that the President is just one of many important factors to consider.

All of that said, there has been a consistent pattern of the US dollar strengthening under Democratic Presidents and generally weakening under Republicans dating back to the 1980s. As the chart below shows, Democrats Bill Clinton and Barack Obama presided over periods where the US dollar index generally rose, whereas George H.W. Bush, George W. Bush, and Donald Trump have all seen the greenback move lower under their leadership:

Source: TradingView, GAIN Capital

Viewed this way, a chart spanning over 30 years with seemingly obvious takeaways for the global reserve currency (buy/hold USD under Democratic Presidents and sell/short it under Republican Presidents) is impressive, but we would caution traders against reading too much into it. After all, holding a single trade for 4-8 years based on just one indicator would test most readers’ patience. More importantly, this entire sample size covers just 5 unique Presidents, so it may not be as significant as it initially appears. At a minimum, longer-term traders should keep this possible relationship in mind as one factor informing their outlook toward the greenback.

(2) The Current State of the Race
Despite taking one on the proverbial chin four years ago, polls are still one of the best tools to use to handicap the likely results in November (or at a minimum for insight into what the market is expecting). As of writing in mid-October, Joe Biden holds a strong nearly 10-point lead across an average of major polls, though President Trump still holds an advantage in the Electoral College and there's always the risk of a "polling error" like we saw in 2016:

Source: RealClearPolitics

(3) Election 2020: What happens next?
Looking ahead, forex traders must navigate many unknowns, from the path the COVID-19 pandemic carves out to the identity of the world’s most powerful politician come January 2021. While there is some historical evidence that a Democratic victory on Election Day could provide a tailwind to the US dollar, readers are encouraged to maintain a flexible mindset and avoid allowing their personal political leanings to impact their trading.

We’ve seen many elections across the globe in our 20+ year history, so no matter what November brings, you can trust that we will continue to offer the tools, support, and insights to help you navigate the markets in the months to come and put you in the best position to find success.

If you have any questions about how we can help you in your trading, please reach out today!

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.