With the 60th US presidential election due to take place on 5 November 2024, there is significant global interest in who will be elected. While it is difficult to predict the election outcome as Donald Trump and Kamala Harris compete in their race to the Whitehouse, one thing is for sure: Their policies will shape the future of the US and their relationships with the rest of the world.
The presidential election poses potential implications for financial markets and the global economy. In particular, the election could impact currency exchange volatility, presenting both an opportunity and a challenge for scaling businesses.
Why is currency volatility significant?
Currency volatility can introduce unexpected costs for businesses handling international payments. Without a strategy to manage exposure to unfavourable market movements, companies risk financial losses that could impact their bottom line. However, businesses that proactively implement a tailored FX strategy or consider utilising FX solutions from dedicated brokers could protect their cash flow and profitability, turning potential volatility into a strategic advantage.
How could the US election impact currency exchange volatility?
Timing and preparedness are crucial for businesses navigating this period. Research from Cranfield University indicates that exchange rate volatility tends to increase about a month before US elections. The elected political party and its subsequent policies can further influence market behaviour.[1]
For instance, changes to trade policies could drive market speculation, leading to currency fluctuations before and after the election. The United States holds substantial influence over global trade dynamics, making its election outcomes pivotal for shaping future trade policies, international partnerships, and tariff structures[2]. These shifts have wide-reaching implications for the global economic landscape, impacting currency markets and potentially altering exchange rates depending on the trade approach adopted.
A contributing factor in FX risk
While the US election could significantly influence foreign exchange risk, it should not be viewed in isolation as currency market volatility is driven by a wide range of factors, including current global events, market speculation, shifts in interest rates, and broader political instability such as ongoing conflicts.
Nonetheless, businesses can expect ongoing changes to the currency exchange markets leading up to the 2024 US election and should be prepared for its potential disruption.
Partnering with a dedicated FX broker allows businesses to navigate the complexities of potential currency exchange volatility that may occur during a major election. This collaboration helps to identify and mitigate hidden costs, ensuring that businesses maintain financial efficiency even in uncertain conditions.
Taking a proactive approach to currency management before, during, and after the election is crucial. Businesses that prepare in advance can better shield themselves from potential risks and volatility. IFX Payments supports global companies in addressing these challenges, allowing businesses to maintain stable operations and make informed decisions despite the uncertainties of the US leadership contest. Our FX services ensure clients are well-positioned to manage market fluctuations and optimise their currency transactions throughout this period.
The contents of this blog do not constitute financial advice and are provided for general information purposes only.
[1] Alexiou, C., Vogiazas, S., & Kane, C. (2023). The impact of US elections on the Dollar’s exchange rate. Cranfield University. https://dspace.lib.cranfield.ac.uk/items/0a69c066-bfaa-44f1-9ef5-00bb881f9cf6
[2] Brown, L., & Giesemann, E. (2024). Outcome of US presidential election will impact trade and tariffs. EY. https://www.ey.com/en_us/insights/tax/outcome-of-us-presidential-election-will-impact-trade-and-tariffs.
