Countdown to the US election
Can Biden stop Trump claiming a second term?
The US Presidential Election sees incumbent Donald Trump vying for a second term against Democrat candidate Joe Biden, with voters being polled on November 3 later this year.
Presidents with a struggling economy generally fail to win a second term1 but there could be more to it than that this time. With politics deeply polarised along partisan lines and a pandemic that has so badly hurt the US economy, there are no certainties.
The White House has been keen to push the blame for the pandemic towards China2, a strategy which creates a common enemy for his supporters to get behind him to fight. In his previous election, the same strategy was used against Mexico, for example, as he trumpeted the campaign slogan of ‘build that wall’.
Despite this, the rhetoric is already returning to the US-China trade war. An agreement was reached back in January as both countries agreed to work together to end hostilities which resulted in raised tariffs on goods in both countries. But President Trump had said in early May he was “torn” about whether he wanted to press ahead with the next stage given his view that China is responsible for the COVID-19 outbreak and the impact it has had on the USA3.
We can expect more of the same arguments in the coming months. But this is most certainly one to watch as it could have far-reaching consequences on already bludgeoned global markets, plus the US dollar and both the Australian dollar and New Zealand dollar given the key players in this fight between economic titans.
What could this mean for the US dollar, Australian dollar and New Zealand dollar?
Keep an eye out for any major news on the election, COVID-19 progress in the US and the US-China trade deal as they all have the power to move the US dollar and the commodity currencies. But as a safe haven currency, the likely move for the US dollar if there is negative news within the current economic environment is for it to strengthen against other currencies.
Ask an OFXpert
Our OFXpert Hamish Muress answers questions on the recovery indicators to watch.
Q. How important are unemployment levels in relation to signs of recovery?
A. Very important. We have seen extremely high levels of unemployment as a result of the COVID-19 crisis, with for example a record high of 14.7% in April 2020 in the US4. There is no question that this is something President Trump will focus on between now and November as he vies for a second term as President.
Politics aside, it’s critical for a country to get its workforce back to work and earning reliable income. With stable income comes higher spending in shops, cinemas, restaurants which in turn keeps businesses running, and drives growth. The big unemployment figures in the US are eye watering, and it’s no surprise to see retail spending at historic lows. Due to the importance of consumer spending in America, which accounts for the majority of its GDP through goods and services, retail spending is absolutely critical but will only rise once people are able to return to work.
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Learn more in the latest edition of the OFX Currency Outlook. It’s been produced to help you navigate market movements today, and to understand what to watch out for in the coming months.