Presidential Elections impact on Dollar and Bitcoin
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The U.S. dollar is key in global finance. It's used in trade and as a reserve currency. Presidential elections can greatly affect the dollar's strength.
Changes in leadership and policy expectations lead to currency swings. These swings show how markets view future economic stability and policies.
Historical Trends: Presidential Elections and Dollar Volatility
Presidential elections bring uncertainty to markets. Investors try to guess how the election will affect policy and interest rates. This uncertainty makes the dollar more volatile.
Here is how the DXY moved after the last 4 elections
Price action suggests that we could go higher short-term, then down. However, Im not trying to predict anything now. I would rather wait and then do my classic trading setups as usual.
Volatility can happen before and after an election. It depends on the clear result and policies the new administration will follow.
Election Cycles and Currency Movements: The dollar is more volatile during election years. But, this effect varies based on market expectations of each candidate's policies.
Historical Examples: In 2016, Donald Trump's win made the dollar rise at first. This was because of his pro-business policies. But, the 2008 election led to uncertainty and a weaker dollar.
Factors That Influence the Dollar During Elections
Several things affect the dollar during elections. These include:
Economic Policy Outlook: Markets watch candidates' economic plans. Policies that boost growth, like tax cuts, help the dollar.
Trade and Foreign Relations: Candidates' views on trade and foreign relations matter a lot. Protectionist policies might strengthen the dollar but could harm growth in the long run.
Federal Reserve Influence: The president's Fed picks shape monetary policy. Markets react to changes in policy, like interest rate shifts, which affect the dollar's value.
Market Reactions and Investor Behavior
Before an election, investors often wait to see what happens. This makes the dollar move as they adjust their investments. After the election, the dollar's value changes based on the new policies.
Currency as a Safe Haven: The dollar is often seen as safe during uncertain times. Even with U.S. risks, investors might choose the dollar for its stability.
Impact of Policy Announcements: The dollar's immediate reaction depends on the winning candidate's policy plans. Big spending plans can lead to inflation, weakening the dollar over time.
If we check COT data we can see that Non-comercials as well as commercials are both around 50/50 hedged.
Empirical Data and Case Studies
Studies show different effects of elections on the dollar, based on the economy:
2016 Presidential Election: The dollar rose after Trump's win due to his economic plans. These plans were seen as good for growth, leading to a positive dollar reaction.
2020 Presidential Election: After Biden's win, the dollar fell. This was because of expected big spending and low interest rates, which could cause inflation.
2024 Presidential Election: From a technical perspective, COT and seasonal tendencies. I think we could see push up but then the dollar is set for the deep dive.
While Bitcoin has only been around since 2009, it has already experienced several U.S. elections with discernible impacts:
2016 Presidential Election: The lead-up to and aftermath of the 2016 election, which saw Donald Trump take office, coincided with an increase in Bitcoin's price. The market anticipated regulatory easing and lower corporate taxes, creating a favourable environment for risk assets. Additionally, there was heightened uncertainty in global markets, leading some investors to consider Bitcoin as a hedge.
2020 Presidential Election: The 2020 election was accompanied by heightened political tension and economic uncertainty due to the COVID-19 pandemic. After Joe Biden’s victory, Bitcoin surged, with many investors perceiving the incoming administration’s stimulus policies as likely to increase inflation risks. This led to a major inflow of institutional investment into Bitcoin, pushing it toward new all-time highs.
This can also be positive for the Bitcoin. Overall I think the impact will be just short term, whoever wins we will see a rally as the global liquidity is rising and it's the main driver for the bitcoin
Long-term Implications
The long-term dollar impact of elections depends on policy changes. Initial reactions can be strong, but lasting effects are rare. They happen only if new policies significantly change the economy or global trade.
Conclusion
The U.S. presidential election has a big impact on the dollar. This is due to market feelings, policy hopes, and the economy's state. Even though short-term ups and downs are usual, the dollar's long-term fate hinges on the new administration's actions and the economy's performance.
Knowing how these factors work helps investors and policymakers. They can better prepare for and adjust to changes in currency markets during election times.
Thanks for reading
Dave FX Hunter
Changes in leadership and policy expectations lead to currency swings. These swings show how markets view future economic stability and policies.
Historical Trends: Presidential Elections and Dollar Volatility
Presidential elections bring uncertainty to markets. Investors try to guess how the election will affect policy and interest rates. This uncertainty makes the dollar more volatile.
Here is how the DXY moved after the last 4 elections
Price action suggests that we could go higher short-term, then down. However, Im not trying to predict anything now. I would rather wait and then do my classic trading setups as usual.
Volatility can happen before and after an election. It depends on the clear result and policies the new administration will follow.
Election Cycles and Currency Movements: The dollar is more volatile during election years. But, this effect varies based on market expectations of each candidate's policies.
Historical Examples: In 2016, Donald Trump's win made the dollar rise at first. This was because of his pro-business policies. But, the 2008 election led to uncertainty and a weaker dollar.
Factors That Influence the Dollar During Elections
Several things affect the dollar during elections. These include:
Economic Policy Outlook: Markets watch candidates' economic plans. Policies that boost growth, like tax cuts, help the dollar.
Trade and Foreign Relations: Candidates' views on trade and foreign relations matter a lot. Protectionist policies might strengthen the dollar but could harm growth in the long run.
Federal Reserve Influence: The president's Fed picks shape monetary policy. Markets react to changes in policy, like interest rate shifts, which affect the dollar's value.
Market Reactions and Investor Behavior
Before an election, investors often wait to see what happens. This makes the dollar move as they adjust their investments. After the election, the dollar's value changes based on the new policies.
Currency as a Safe Haven: The dollar is often seen as safe during uncertain times. Even with U.S. risks, investors might choose the dollar for its stability.
Impact of Policy Announcements: The dollar's immediate reaction depends on the winning candidate's policy plans. Big spending plans can lead to inflation, weakening the dollar over time.
If we check COT data we can see that Non-comercials as well as commercials are both around 50/50 hedged.
Empirical Data and Case Studies
Studies show different effects of elections on the dollar, based on the economy:
2016 Presidential Election: The dollar rose after Trump's win due to his economic plans. These plans were seen as good for growth, leading to a positive dollar reaction.
2020 Presidential Election: After Biden's win, the dollar fell. This was because of expected big spending and low interest rates, which could cause inflation.
2024 Presidential Election: From a technical perspective, COT and seasonal tendencies. I think we could see push up but then the dollar is set for the deep dive.
While Bitcoin has only been around since 2009, it has already experienced several U.S. elections with discernible impacts:
2016 Presidential Election: The lead-up to and aftermath of the 2016 election, which saw Donald Trump take office, coincided with an increase in Bitcoin's price. The market anticipated regulatory easing and lower corporate taxes, creating a favourable environment for risk assets. Additionally, there was heightened uncertainty in global markets, leading some investors to consider Bitcoin as a hedge.
2020 Presidential Election: The 2020 election was accompanied by heightened political tension and economic uncertainty due to the COVID-19 pandemic. After Joe Biden’s victory, Bitcoin surged, with many investors perceiving the incoming administration’s stimulus policies as likely to increase inflation risks. This led to a major inflow of institutional investment into Bitcoin, pushing it toward new all-time highs.
This can also be positive for the Bitcoin. Overall I think the impact will be just short term, whoever wins we will see a rally as the global liquidity is rising and it's the main driver for the bitcoin
Long-term Implications
The long-term dollar impact of elections depends on policy changes. Initial reactions can be strong, but lasting effects are rare. They happen only if new policies significantly change the economy or global trade.
Conclusion
The U.S. presidential election has a big impact on the dollar. This is due to market feelings, policy hopes, and the economy's state. Even though short-term ups and downs are usual, the dollar's long-term fate hinges on the new administration's actions and the economy's performance.
Knowing how these factors work helps investors and policymakers. They can better prepare for and adjust to changes in currency markets during election times.
Thanks for reading
Dave FX Hunter
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