2024 Election & Global Markets: Preparing for Currency and Commodity Volatility

As with many major global events, the quickly-approaching presidential elections in the United States could shake markets up. Let’s take a deeper look at currency and commodity markets in particular, and get a handle on what may be behind some of the major shifts both being observed now and expected following the election on 5 November:

Will the Greenback Start to Fade?

White House elections have been known to generate uncertainty for forex traders, and the 2024 contest is no different. The policies of the next president—whether it's Donald Trump or Kamala Harris — will have significant implications for the U.S. dollar, with global trade, fiscal measures, and market confidence all playing crucial roles.

If Donald Trump returns to the White House, his policies are expected by many to create volatility in the currency market. Trump's preference for higher tariffs and a more protectionist stance toward international trading partners could lead to a stronger greenback. As tariffs increase, U.S. trade partners may see economic slowdowns, potentially prompting capital to flow into the dollar as a safer investment. Historically, Trump's presidency saw a strengthened dollar, particularly in response to aggressive trade policies and geopolitical tensions, which can attract investors looking for security. If such patterns are repeated during a second Trump administration, key forex pairs such as the EUR/USD may move lower.

Alternatively, a victory by Kamala Harris would likely bring a continuation of current President Biden’s policies, which may limit the dollar’s gains. Harris’ less adversarial approach to trade and more moderate fiscal expansion policies could result in a weaker dollar, as markets might anticipate reduced volatility compared to a Trump presidency. Additionally, a Harris administration might focus on internal economic stabilisation rather than the aggressive foreign policies seen under Trump, which could mean fewer opportunities for the dollar to rally on geopolitical risk, leading some forex pairs like the GBP/USD to rise.

Regardless of the election’s outcome, investors should prepare for the possibility of significant currency fluctuations. A contested election could also send ripples across the market in the wake of political uncertainty. Thus, the period surrounding the election presents both risks and opportunities for traders focused on the USD and broader forex markets.

Oil, Precious Metals to Shift?

The world's reserve currency is not the only market component that may be in for a bumpy ride on the road to 5 November; various commodities could see their values swiftly shift as well. In the run-up to the 2024 election, oil and precious metals like gold (XAU), silver (XAG), and palladium (PA) are expected to experience notable price shifts.

For oil (CL), geopolitical factors such as tensions in the Middle East, especially the conflict between Israel and Iran, are already affecting prices. A further escalation could restrict oil supply, particularly through critical channels like the Strait of Hormuz, driving prices even higher. If oil prices spike, it could lead to a rise Americans pay at the pump, which directly impacts consumer sentiment. Savvy analysts have been sure to note that higher gasoline prices may very well drain public approval of Vice President Kamala Harris if voters link the price hikes to her administration’s policies. However, some experts argue that unless oil prices rise sharply, this impact may be limited, as gas prices have already declined from recent highs.

Precious metals, on the other hand, are often perceived as safe-haven assets by cautious investors during periods of uncertainty, and the 2024 election season does not look to be an exception. Gold has reached historic price highs this year, driven by inflation concerns and geopolitical instability across the eastern hemisphere. Investors tend to flock to assets like gold and silver in uncertain times, and the possibility of a change in U.S. fiscal or monetary policy post-election could further fuel demand. The potential for inflationary pressures, especially if there is increased government spending under a Harris administration, could also drive precious metals prices upward, offering refuge for risk-averse investors. (Source: ABCNews)

Conclusion

In conclusion, the outcome of the 2024 U.S. presidential election will play a crucial role in shaping both currency and commodities markets. Whether it's the U.S. dollar, oil, or precious metals, traders should expect volatility driven by geopolitical factors, economic policies, and market sentiment as the election approaches. Whichever way the prices of these various economic inputs turn, the market phenomena are sure to be interesting.