Happy New Year to you all and very best wishes from all at SGM-FX for the year ahead. As liquidity and volume return to the markets following the festive period the true impact of the events and themes presented in the real economy last year should begin to play out. For example, the stronger Dollar story that many had called for following developments surrounding US monetary policy could now begin to feed into markets. Position adjustment is likely to see significant changes in currency markets early on into the trading year.
Another factor that could also move national and monetary union currencies is politics, in particular, its focal point: elections. As we have seen in recent days, the pandemic, in particular the way candidates foresee its continuation or conclusion, is playing an ever-important role in the polls. In France, where elections will be held later this year, we are seeing the role of the pandemic shape not only the policies each candidate champions but also the very way they deliver their manifestos on the campaign trail.
Of course, in the pursuit of liberty, many candidates in France are putting aside the current wave of covid infections to continue their campaign rallies. Others, including incumbent President Macron and his La République en Marche, have pledged to limit crowd numbers and implement other measures on the campaign trail to limit the potential spread of covid infections.
The contention that covid can bring to elections will bring fresh risks to forecasting electoral outcomes and therefore currencies. Put simply, in the myriad of elections in the calendar this year, each will carry with it a greater uncertainty due to the variable of the public’s reaction to each candidate’s stance on covid potentially inviting greater volatility. Some surveys are showing that a candidate’s stance on the pandemic are as important an influence as any, threatening the typical hegemony of party loyalty and taxation in voting choices.
Discussion and Analysis by Charles Porter
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