US election will dominate foreign exchange market in last months of 2016 - Natixis

Research Team at Natixis, suggests that the November US presidential election will be watched particularly closely by financial markets, in particular the foreign exchange market, given the radical policies propounded by Donald Trump, which are steeped in protectionism and isolationism, coming at a time when global trade is languishing.

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Our assessment is that a victory of Hillary Clinton would not affect our baseline scenario, which is for a gradual appreciation of the US dollar. If Donald Trump prevails, this would be positive for the greenback in the short term in that it would stoke uncertainties at political and economic levels, but it would be negative over the medium term in that it would raise the spectre of stagflation in the US.

While we privilege a victory of Hillary Clinton, Donald Trump’s recovery in the opinion polls will stoke uncertainties at political and economic levels, bearing in mind the large number of undecided voters (25 million) and the recent electoral victories by populist movements (United Kingdom, Austria, Spain, Italy, Philippines, etc.). Making predictions about how foreign exchange rates will be influenced by the outcome of the US presidential election is particularly difficult in that, besides the identity of the next President, there is the matter of the composition of the US Congress (Senate and House of Representatives).”