The US Election Affects Your Wealth - Whoever You Are

Three immediate outcomes of next Tuesday's election will be the impact on Brexit, Sterling and and emerging market currencies.

According to analysts Emerging-market currencies could rally 5% by the end of the year should Biden win the presidential election. In recommendations to investors, some currency strategists say they have entered long positions in the South African rand and Russian ruble against the dollar, and have moved to shorts on the U.S. currency versus the Brazilian real, Mexican peso and Colombian peso On Monday, the world will head into the last full trading day before the U.S. election with stocks and currencies near their highest levels since January and dollar-bond spreads close to their narrowest since February. Don’t expect it to get much better than that until election results start trickling in and hedge-funds start taking positions. Caution is likely to be the watchword for investors, with the Nov. 3 vote set to reveal not just whether Joe Biden’s opinion-poll lead over Donald Trump will propel him to victory, but also determine the fate of the much-anticipated U.S. stimulus package. And there’s always the risk of a contested result.

“It makes sense for emerging-market investors to maintain only light (risk-bullish) positions in the remaining days before the U.S. election,” a Credit Suisse SA team including Kasper Bartholdy, managing director of fixed-income strategy in London, wrote in a report. “This is in part because we see sizable residual scope for the ‘Biden/Trump U.S. voter-support gap’ to fluctuate. It is also because we see a large risk that ongoing negotiations in the U.S. about pre-election fiscal-policy stimulus will falter and cause some temporary market consternation.”

United Kingdom & European Union In negotiations with the EU, Boris Johnson has indicated that he is willing to walk away without a deal - triggering a Hard Brexit which will have major ramifications; not just on the UK's and EU's economies but also the Good Friday Agreement which brought peace to Northern Ireland. Joe Biden and senior Democrats in Congress have already articulated that they take a very dim view of anything that imperils peace on the island of Ireland while Donald Trump has indicated a stronger willingness to sign a trade deal with the UK in that event. Regardless of the winner, Heritage Pay Dealers expect the impact on Sterling to be immediate.

China said on Monday it will impose unspecified sanctions on the defense unit of Boeing Co., Lockheed Martin Corp., and Raytheon Technologies Corp. after the U.S. approved $1.8 billion in arms sales to Taiwan last week.

South Africa’s Finance Minister Tito Mboweni will present the medium-term budget policy statement on Wednesday after asking parliament to delay it by a week so the Treasury can assess the implications of the  Government’s economic recovery plan on spending There’s “limited potential” for the rand to strengthen beyond the 16.08 per-dollar intraday peak seen in September and investors should trim their positions in local-currency bonds before then, according to Credit Suisse Credit Suisse sees a “high chance that the Treasury will fail to deliver meaningful fiscal consolidation measures in the near term,” a team including Kasper Bartholdy said The rand is one of the best-performing developing-nation currencies this month South Korea will announce third-quarter GDP on Tuesday, with economists projecting growth of 1.3% over the previous three months The country will also release October consumer confidence on Wednesday, and November business confidence on Thursday. Industrial production for September due on Friday is expected to show the first year-on-year growth since March. October trade numbers are due on Sunday. The month had fewer working days than October 2019, meaning the data are expected to show a year-on-year decline South Korea’s won was the strongest currency in Asia again last week despite warnings of intervention from authorities

Malaysia’s September trade accounts are due on Wednesday, with the consensus for a slight widening of the surplus

The ringgit was little changed last week amid a decline in political noise. However, the King’s refusal to grant the Government a state of emergency to tackle the pandemic -- which was viewed by the opposition as an attempt by the premier to retain control amid a power struggle -- will keep markets on the alert

Thailand’s cabinet is due to meet Monday and Tuesday to discuss how to respond to the ongoing anti-government protests

September manufacturing production is due on Wednesday, with economists forecasting a slower pace of decline. Balance-of-payments and trade numbers are due on Friday The baht was Asia’s worst-performing currency last week after the Indian rupee. The currency dropped despite attempts by the prime minister to calm political tensions by lifting the state of emergency Taiwan will release third-quarter GDP on Friday, with a small return to growth anticipated Taiwan’s dollar maintained its recent pattern of strengthening during the day and erasing its advance toward the close of trading

Turkey’s central bank will reveal its latest inflation forecast in its quarterly report on Wednesday The lira weakened through 8 per dollar for the first time amid deepening skepticism over the central bank’s efforts to shore up the currency at a time of rising geopolitical tensions After an unexpected rate hike in September stoked bets that the central bank had shifted to a hawkish stance, policy makers surprised the markets by keeping the policy rate on hold last week.

To discuss how the above may affect your money transfer requirements, please contact your Currency Dealer at Heritage Pay on +44 (0) 207 117 2934.

None of the information in this article is, nor should be construed as, financial advice. All foreign exchange transactions involve risk and you should always seek your own independent financial advice before entering into any foreign exchange transaction.

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