22 AUGUST 2024
We have seen that the US election is not of primary importance for either equity or multi-asset portfolios. What about currencies, which should be more impacted by shifts in public policy and approaches to, say, government debt burdens?
As the chart below shows, it’s actually a similar story – the US dollar has not shown a consistent trend, either strengthening or weakening, in the period one month before or one week, month or quarter after the US election over the period dating back to 1984. That’s ten elections, covering both Democrat and Republican winners.
Again, this is because nearer-term interest rate decisions are far more important. Currently, the Bank of England looks poised to start cutting rates due to softening inflation and slower wage growth, which should weaken sterling. However, as US rate cuts will probably not be far behind, the impact of any UK rate cuts ahead of the US election is likely to be muted.
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