The U.S. presidential election, scheduled for November 5, is generating great anticipation in global financial markets.
The influence of this election on the dollar is one of the most discussed topics currently. Regardless of who wins – whether a Republican or a Democrat candidate – the impact will be felt.
The First Debate and Its Effects
In the first presidential debate, Donald Trump of the Republican Party was seen as the winner by many experts, causing an immediate reaction in the financial market. The dollar strengthened globally, reflecting Trump’s perceived victory in the debate.
Marcio Riauba, manager of StoneX’s Trading Desk, observes: “Trump surged ahead in voter preference, and the next day, the result in the foreign exchange market was a sharp appreciation of U.S. treasury yields, helping strengthen the dollar globally.”
Scenarios for the Dollar
Victory of Donald Trump
Economic Uncertainty: A possible return of Trump to the White House could increase economic uncertainty, favoring the rise of the dollar and harming emerging market currencies.
Protectionist Economic Policy: Trump has hinted at a more protectionist economic policy, including a potential 10% import tax, which could affect competitive sectors in Brazil, such as agriculture.
Victory of Kamala Harris or Another Democrat
Monetary Easing: More pressure is expected on the Federal Reserve (Fed) to initiate monetary easing, which could lead to the appreciation of emerging market currencies due to the attractiveness of interest rate carry trade.
Impact on Interest Rates: Kamala Harris could push for American interest rate cuts, aiding in the strengthening of emerging market currencies and global economic growth.
The Federal Reserve and Interest Rates
The Fed plays a crucial role in this scenario. Although the election campaign is ongoing, the Fed’s interest rate decisions will not be directly influenced by the candidates but by economic conditions.
Fabrício Gonçalvez, CEO of Box Asset Management, emphasizes: “The market is highly complex and influenced by various factors, not just political ones.”
The ongoing drama surrounding U.S. interest rates has delayed potential rate cuts, possibly until September. Even without direct interference, the Fed’s decisions have global impacts, influencing emerging markets and currencies.
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As the U.S. election campaign progresses, the global financial market will continue to respond to political fluctuations. The election’s outcome will have significant implications for the dollar, impacting investments and economies worldwide.
At Lux Capital, we are closely monitoring these developments to provide our clients with the best investment strategies, staying committed to efficiency, agility, and convenience.