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Exchange rates and elections

Exchange rates and elections

Old Sep 21st 2012, 5:17 pm
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Default Exchange rates and elections

A random thought occurs to me. Looking at the £/$ exchange rate it has looked fairly flat since about mid 2009.

What is the current opinion on where it will go after the election? Does the market favor one candidate over the other?
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Old Sep 21st 2012, 6:02 pm
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Default Re: Exchange rates and elections

I will start this by saying I am not an economist. I just watch this quite closely for trying to optimise when I move money. The global economic outlook is also related to the industry I work in, and I try to pay attention.

My simple take on this is that when the economy is booming, globally, people are happy to have money in other currencies. When the economy sucks, people go for the "safe" haven of the dollar. This can then get nudged by economic news. What has triggered the recent 5c differential increase? The Fed's announcement of a sustained QE3 programme. If we see good news coming from the Eurozone, we may see a little more improvement - the German court case was a good one to look at for that. If the Bank of England is going to try a financial stimulus, we will see the differential narrow.

With all that said, it depends on what the global economic outlook is post November.

Romney: I could see oil creeping up, along with the FOREX, but I don't think it has too much further to go. This will likely be a blip, until he were serving in 2013. As much as anything it depends on the make up of congress, on what he can then achieve.

Obama: ditto the congress line, I wouldn't expect much change.

What I think will be more substantial is if/when China runs out of money (which is rumoured to be close, but who knows) and if oil prices are depressed as a result of a spike in food prices next year following the terrible harvests this year. That could knock economic confidence, sending the rate closer to 1.50.

That's my 2 cents/1.23 pence (@ 1.625)
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