Background
The US presidential election cycle and results have historically had an impact on the dollar. For example, the dollar rose in November and December after Donald Trump’s 2016 election win while falling after Joe Biden’s 2020 victory.
This year, tariff policy is the biggest driver of potential volatility in the foreign-exchange market.
The dollar climbed to its strongest level in two months after slipping in September, and some of this gain could be credited to Trump’s continued speeches on how proposed tariff policies would affect China, Mexico and Europe. Dollar-peso options implied volatility has been on the rise for six months and traders are looking for wider swings after the election.
Mentions of tariffs on earnings conference calls in Europe so far this month are outpacing those in the US by a ratio of 5:2. Characterizations of these tariffs have been negative.
