The U.S. Dollar Index continues its upward trajectory on the daily chart, but MACD lines and volume bars show a decrease in momentum. Thursday’s U.S. CPI data reminded the market of the underestimated strength of the U.S. economy. Meanwhile, compared to last year, volatility in U.S. stock options remains relatively high, indicating a defensive stance among investors. However, there is no clear indication that this is mainly election-driven.

U.S. Presidential Election System

Reported by TMGM Group, the 2024 U.S. presidential election is scheduled for Tuesday, November 5, 2024. This will mark the 60th presidential election in U.S. history. Additionally, all 435 seats in the House of Representatives and 33 seats in the Senate will be up for re-election to form the 119th U.S. Congress. According to the U.S. electoral system, the president is elected by the Electoral College, not directly by the voters. The candidate who secures the majority of electoral votes wins the presidency. On Election Day, voters not only choose among presidential candidates but also elect 538 electors representing the 50 states and Washington, D.C., who form the Electoral College. Most states follow a "winner-takes-all" approach, awarding all their electoral votes to the candidate who wins the state’s popular vote. As a result, the election outcome is usually predictable based on state results on Election Day. This will also be the first presidential election conducted using the population data from the 2020 U.S. Census.

Comparison of Presidential Candidates: 2020 vs. 2024

  • 2020: On August 18, 2020, Joseph Biden became the Democratic Party’s presidential candidate, with Kamala Harris nominated as vice president. On August 24, Donald Trump was officially nominated as the Republican candidate, with Mike Pence accepting the vice-presidential nomination on August 26.
  • 2024: On July 15, 2024, the Republican Party nominated Donald Trump as its presidential candidate. On July 21, the Democratic Party’s initial nominee, then-President Joe Biden, announced he would not seek re-election, supporting Vice President Kamala Harris instead. By July 22, Harris had secured the majority of Democratic delegate votes and was confirmed at the Democratic National Convention from August 19 to 22, 2024.

Election Uncertainties

On July 13, 2024, Republican candidate Trump survived a shooting incident during a campaign rally in Pennsylvania and was escorted to safety by Secret Service agents. Following the incident, Democratic leaders, including Biden, condemned political violence and expressed sympathy for Trump. This incident highlights the increasing polarization in U.S. politics, adding another layer of uncertainty to the remaining election period.

Market Impact

The U.S. presidential election is beginning to unsettle emerging market investors. Data shows that the one-month implied volatility of emerging market currencies has risen for eight consecutive trading days, the longest since January 2019, signalling heightened nervousness ahead of the November 5 vote. For CFD traders, the implications vary depending on the outcome:

  • Kamala Harris as President: Continuity in policies may limit potential market volatility, supporting risk assets and potentially triggering a market rally.
  • Donald Trump as President: Renewed trade wars and protectionist policies could increase geopolitical risks, prompting traders to reassess strategies related to emerging markets and the forex space, as currencies in developing countries might face heightened volatility.

Harris currently holds a 49.2% nationwide approval rating, while Trump stands at 47.2%. However, due to the Electoral College system, national averages are less significant than interstate polls, which show a closely contested race. The probability of either candidate gaining full control of the White House and both houses of Congress is considered low. The election is particularly competitive in swing states, and both candidates have ambitious economic agendas. However, unless their parties win the presidency, Senate, and House, their ability to fulfill campaign promises will be limited.

Prior to the election uncertainty, multiple currency pairs had declined, influenced by the Federal Reserve’s cautious stance and the strengthening of the U.S. dollar. The strong U.S. labor market has reduced the likelihood of another significant rate cut. Concerns over potential expansionary fiscal policies post-election are making investors wary. However, election concerns currently rank behind other events such as Middle Eastern conflicts, fluctuations in U.S. economic data, shifts in Federal Reserve rate cut expectations, and the upcoming earnings season.

Market Analysis

The U.S. Dollar Index continues its upward trajectory on the daily chart, but MACD lines and volume bars show a decrease in momentum. Thursday’s U.S. CPI data reminded the market of the underestimated strength of the U.S. economy. Meanwhile, compared to last year, volatility in U.S. stock options remains relatively high, indicating a defensive stance among investors. However, there is no clear indication that this is mainly election-driven.