How will the US presidential outcome impact US dollar?
The big story hanging over Forex traders and anyone else with an interest in the economic future should see its final resolution in the coming few hours. Who will be in charge of the world’s largest economy?
The markets wait with baited breath for the decision of the US electorate, and the impact on the US dollar is opaque, although it did gain ground against the Euro and Sterling in the run up to polling day.
Regardless of who takes the White House, US business confidence appears to hinge more on the looming ‘fiscal cliff’ and its potential impact on federal deficits and debt. The major credit ratings agencies are maintaining a negative outlook on US debt due to this, with the dollar’s ‘reserve currency’ status being one of the few planks still supporting its elevated rating.
Add to the mix the impending change of leadership in the world’s second largest economy, China, and there are some major uncertainties providing opportunities – or threats – in the online currency markets. China’s retiring leadership have in the past looked towards by-passing the dollar for international settlements, and their successors have yet to declare any policy. Should a President Romney stoke the flames with his promise of a first-day declaration that China is a ‘currency manipulator’, Xi Jinping must confront an immediate challenge following this week’s Party Congress in Beijing. Talk of exchange rate based tariffs and WTO action don’t bode well for future stability, and further threaten the fragile global recovery.
Europe’s woes may seem less pressing for the time being, but Germany’s recent re-rating of its growth forecasts has been echoed by declining factory orders, down 3.3% in September, according to figures released today by Berlin’s Economy Ministry, leaving the Euro trading down against the dollar.
