What Will Happen With The USD If Trump Or Kamala Wins?

Current Landscape: Based on recent predictive market data, Donald Trump is currently perceived to have a higher chance of winning the 2024 U.S. Presidential election compared to Kamala Harris. According to Polymarket’s latest data, Trump holds a 54.0% likelihood of winning, while Harris trails with a 45.5% chance. These figures are generated from predictive market platforms, which aggregate the collective sentiment of traders and market participants based on various factors such as public opinion, geopolitical developments, and economic conditions. These platforms often offer a dynamic and real-time reflection of the perceived probability of election outcomes, influenced by everything from media coverage to major political events.

Presidential Election 2024 

 Source: PolymarketsThe slight lead for Trump in these predictions underscores the possibility that many market participants expect his return to office, leaning on his prior track record and policy positions. Predictive markets are not foolproof, but they are useful for gauging the real-time mood of traders, reflecting shifting public sentiment and potential election catalysts, such as debates, endorsements, or campaign missteps.

Potential Impact on the U.S. Dollar (USD): The outcome of the 2024 presidential election is likely to have significant implications for the U.S. economy, especially regarding the value of the U.S. dollar. If Donald Trump maintains his current momentum and wins the election, several economic factors tied to his policy preferences could result in a stronger dollar. Here are some of the key reasons why Trump’s victory might boost the USD:

Pro-Business Policies: One of the hallmarks of Trump’s first term was his administration's focus on tax cuts, deregulation, and business-friendly policies aimed at stimulating domestic economic growth. These policies were generally well-received by markets, leading to a bullish outlook on U.S. assets. If Trump were to return to office, it’s anticipated that he would adopt similar approaches, with an emphasis on reducing corporate taxes and minimizing federal regulations. This could make U.S. businesses more competitive on the global stage, thereby increasing investor confidence and inflows into U.S. markets. A stronger domestic economy often correlates with a rising demand for the U.S. dollar, as investors buy into U.S. stocks, bonds, and other financial assets.Focus on Domestic Manufacturing: Trump’s "America First" economic agenda strongly advocated for the reshoring of manufacturing jobs, aiming to reduce U.S. reliance on imports. If Trump continues this focus on domestic industry in his 2024 campaign, it may reinforce demand for U.S.-made goods and services. Policies that promote domestic production often led to a decreased trade deficit and greater demand for the U.S. dollar on global markets. For instance, a reduction in imports may reduce the need to purchase foreign currencies, while an increase in U.S. exports would likely increase foreign demand for the dollar.Geopolitical Strategy: Trump’s presidency was characterized by a robust stance on trade negotiations, often marked by tariffs and protectionist measures. While these policies sometimes resulted in short-term volatility, such as trade tensions with China, they were aimed at rebalancing trade relationships to favour the U.S. If re-elected, Trump may pursue similar strategies to reduce dependency on foreign economies. A more balanced trade environment, coupled with protectionist policies, could enhance the U.S.’s economic position relative to other countries, which could eventually lead to an appreciation of the U.S. dollar.Moreover, Trump's assertive foreign policy, while occasionally destabilizing in the short term, may foster longer-term market stability if it is perceived to enhance U.S. negotiating power in global trade agreements. This perceived economic strength, and sovereignty could enhance investor confidence in U.S. assets, further supporting the dollar’s value.

Market Stability Perception: Financial markets tend to favour continuity and predictability, as unexpected changes can introduce uncertainty, which often drives investors toward safer assets like gold or currencies perceived as stable. Having already served a term, Trump represents a known quantity. Many investors may view his potential re-election as a continuation of familiar policies, reducing the level of uncertainty and volatility that often accompanies a change in leadership. This stability could, in turn, increase global investor demand for the U.S. dollar, as it is widely regarded as a safe-haven currency.Kamala Harris’ Economic Outlook: On the other hand, a victory by Kamala Harris could lead to different economic priorities, which might have a varying impact on the U.S. dollar. As Vice President under the Biden administration, Harris is associated with more progressive policies that emphasize social equity, environmental sustainability, and expanded government programs, such as healthcare reform and green energy initiatives. While these policies may drive long-term economic benefits in terms of addressing income inequality and fostering sustainable industries, they may not have the immediate pro-business appeal that typically drives investor confidence in the short term.

For example, progressive reforms often involve higher taxes on corporations and wealthier individuals to fund social programs, which can sometimes dampen market enthusiasm, particularly among businesses and investors who prioritize profitability. Additionally, if Harris were to pursue policies aimed at greater government intervention in the economy, some market participants might perceive this as creating more regulatory burdens for businesses, potentially slowing economic growth and weakening the dollar in the short term.

In summary, the current predictive market data suggests that Donald Trump holds a slight edge over Kamala Harris in the 2024 presidential race, with a 54.0% chance of winning. Should Trump secure a victory, markets may respond favourably, anticipating a return to pro-business policies, increased domestic manufacturing, and a more protectionist geopolitical strategy—all of which could bolster the U.S. dollar. Conversely, while a Harris victory would bring progressive reforms, these may not have the same immediate appeal for investors looking for rapid economic growth, and as such, may not strengthen the dollar to the same degree.

With the election still some time away, the situation remains fluid, and market predictions are likely to shift as new developments arise. However, at present, market sentiment appears to be betting on a stronger USD under a potential Trump presidency.

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