All kicking off – US election update

Welcome to our latest US political update with 78 days until the presidential election.

Each week we will take a look at the likes of policy changes, polling shifts, the continued impact of Covid-19, the geopolitical stances that the candidates are taking and of course, the economic impact on the US, the dollar and global trade. The US presidential election remains the most important political event globally and markets are starting to pay attention to the run-in to November’s polling day.

Post off-ice

The main election story from the US last week focused on the US Postal Service after it warned as many as 46 states within the US that it may not be able to process postal votes in time for ballots to be received and returned ahead of the November 3rd election.

The USPS has been losing money for years and is another service that has been negatively affected by the pandemic. News that cuts to spending and curtailing of some operations are being made to save money has some in Congress worried that votes made by those implored to shield themselves from the pandemic will not be counted.

Democrats are also worried that Louis DeJoy, the US postmaster-general is deliberately slowing the postal service to benefit the man who put him in the job, President Trump. The President has long railed against mail-in voting on the basis that he believes it increases the chances of widespread fraud. President Trump also believes the election in 2016 was hugely affected by voter fraud. Neither claims are exactly overburdened with evidence.

We expect to see a fight in Congress over funding for the USPS with President Trump trying to tie any further funding into what he wants to see from any additional stimulus plans.

Convenient convention

Today marks the beginning of convention season with the Democratic National Convention starting today and the Republican meet-up next week.

The conventions are obviously being held online and will offer both financial and betting markets an opportunity to refocus on electoral risk in the long run-in to the November 3rd election.

Looking at the number of speakers at the Democratic National Convention who identify with the ‘progressive’ part of the party, there is the risk that speeches by Senators Warren and Sanders and Representative Alexandra Ocasio-Cortez increase the market belief that the US could see a higher redistributional tax environment under a Biden Presidency than is currently expected.

Such a move would largely be seen as negative for both stocks and the US dollar with investment likely to move elsewhere as a result.

Sanders speaks tonight, Ocasio-Cortez on Tuesday and Warren and Vice President Nominee Kamala Harris on Wednesday with Biden finishing up on Thursday.

Take a minute

The most important piece of structural data this week is likely to be Wednesday’s Federal Reserve minutes that should show how it will set up its ongoing policy of forward guidance on how low interest rates will remain and for how long. We also think that members of the Federal Reserve may also have discussed the path forward for asset purchases although a tapering of plans is unlikely to receive a solid date until the end of the year.

Have a great week.

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Jeremy Thomson-Cook

Jeremy Thomson-Cook

Jeremy has over 13 years experience working in the FX industry. As a specialist in political risk mitigation and currency hedging, he regularly advises clients on the day-to-day moves of the markets and the implications of fiscal and monetary policy on international businesses.