Can presidential election trigger dollar volatility?.

Can presidential election trigger dollar volatility?.

OFX reports that this is an unusual year, with multiple factors compounding the uncertainty we typically see leading up to an election.

The last few weeks have thrown some curveballs including one of the candidates contracting COVID-19, a new Supreme justice being confirmed in record speed, ongoing negotiations on COVID-19 economic relief and speculation there could be a contested election result.

Can Uncertainty drive USD strength?

One thing is for certain, we are bound to see increased volatility in currency markets in the coming weeks, so anyone who needs to move money either into or out of US dollars should be looking to use this volatility to their advantage.

This has been an essential factor in the recent USD recovery since mid-September as we approach the election and US fiscal stimulus continues to be delayed. In the lead up to the election, markets are continuing to take direction from updated polling and evolving headlines.

How will the outcome of results impact on the  US dollar?

When risk sentiment increases, equity markets rise and the US dollar falls, and investors are generally willing to take on more risk. In particular, the control of the Senate will be hotly contested and while a Democrat win is looking more likely, changes in outcome expectations could prompt volatility.

If the status quo is maintained, we expect that financial markets should be more stable until we have a definitive outcome.

What should you do now?

With swings in the US dollar likely to go both ways, those who are buying or selling USD could have the opportunity to buy low and sell high.

Sebastian Schinkel, OFX Head of Treasury encourages clients to put Target Rate Transfers in place to take advantage of the increased likelihood you will hit your target in the coming weeks, due to volatility.

“If you set up a Target Rate Transfer, you don’t have to worry about missing an opportunity when rates move in your favour because we will automatically make the trade for you,” Mr Schinkel explained.

Conclusion

Still feeling a little overwhelmed with currency swings? Whether you’re waiting for the right exchange rate, or just need a little support with the transfer process,  OFXpert team is always available to help 24/7. Contact them today

 

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