RIP RBG – US election update

Welcome to our latest US political update with 42 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.

What now for the court?

There is really only one political story in the US at the moment and that is the impact that the death of Supreme Court Justice Ruth Bader Ginsburg will have on the upcoming election. Bader Ginsburg was a lion of the left in US jurisprudence and her passing represents a huge loss for liberals on the Supreme Court.

Supreme Court Justices are appointed by the President of the day, confirmed by the Senate and serve in their role until their death. It therefore stands that a position on the court gives an Administration the ability to set the course of the law in the US for decades in some cases. Before Bader Ginsburg’s death the court leant to the right of US politics, the fear for many now is that another Trump appointment – following his appointment of Brett Kavanaugh last year – would lock the court into an almost unbreakable level of support for the American right.

A question of timing

There is currently six weeks to go until Americans head to the polls and, given the current state of polling, likely vote for Joe Biden to become the 46th President of the United States. Biden has already made clear that he believes that a new Justice should not be nominated until after the election whereas Trump is happy to get the ball rolling now and try and get his choice through before he runs the risk of losing the Presidency.

An added layer of complexity comes from the fact that, unlike in the UK, even if the incumbent loses, they still maintain power until January 20th – Inauguration Day – and therefore can still do what they want as long as Congress also wants the same thing.

In other words, while Trump may be told in 42 days that he needs to find other employment from January 20th onwards, he has 121 days to force through his pick for the Supreme Court

Why does this matter for the election?

Idealists will tell you politics is about making the world better. Realists will tell you politics is about power and the ability to use it. Republicans can secure strength on the Supreme Court for decades to come and there’s not much that Democrats can do in the short term. They can try and delay any confirmation hearings and votes in the Senate until after Inauguration or maybe slow play stimulus spending plans but there is not much, there is no hard and fast rule they can apply to the process.

In the 2016 election the Supreme Court was seen as a major reason for voting for Republican voters but not for Democrats and while there is always a chance that turnout could increase as a result of it becoming more of an issue, we have our doubts.

In the short term, making the Supreme Court an election issue is undeniably good for the Trump administration as the news cycle will shift from his administration’s mishandling of the Coronavirus crisis.

What could it mean for the USD?

If you want a stronger dollar, you have to be hoping for a Trump win and the developments over the weekend have not changed that. Similarly, it is too early for polling to be able to capture voter response to the death of Bader Ginsburg.

In the short term we would signal caution over the USD should Democrats use stimulus as a bargaining chip in the battle to fill the vacancy on the Supreme Court.

How are the polls sitting?

As of this weekend, an average of polls taken by the statistics website fivethirteight.com show Joe Biden currently enjoys a 7-point lead over the President.

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.