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Politics Shaping the Markets

ICE Markets

Over the next few months there will be over 18 national elections across the globe injecting fresh uncertainty and volatility into the market place. The focal point for many is fixed directly on the possible scenario’s of the Brexit debacle. The certainty of any of the possible options is not apparent and has broad implications. If Theresa May loses to ratify her deal through the British parliament again then the exit from the European union could be scrapped completely, the British may have to take part in the European elections themselves, another referendum for the British people to decide the direction they will take or a British general election could also take place, just to mention a few. How has this impacted the markets? Well the pound sterling was the only currency amongst “the majors” to lose ground to the greenback this week dipping as low as 1.3020 or -1.4% from the start of the week. Any political ripples cause waves on the financial markets.

Elections to take place this year:

Australia, Canada, Poland, India, South Africa, Ukraine, Turkey, Israel, Romania, Thailand, Philippines, Indonesia, Bolivia, Uruguay, Argentina, Panama, El Salvador, Guatemala.

Many of the countries listed above fall into the emerging markets category, but one that will be watched closely is India. Having cemented its place as an economic superpower, the parliamentary elections and dictation of future monetary policy will be hot topic for many economists. Last year we witnessed the first-hand effects of how a slow down in a large economy, (China), had a correlative impact onto the global market. India is the second largest economy in Asia and accounts for almost 1/5 of the global population, a justified reason for intrigue by professionals in the industry. The election so far is sure to be contested by two parties, (Bhartiya Janta Party and the Congress Party), that both have stable agendas and a firm stance of how economic policy is to be conducted. The Indian Rupee is up over 4.7% over the last 6 months.

When uncertainty becomes obvious, (unsure of the result of elections or political view points dictating policy once power has been acquired), then the market tends to favour the US dollar. It is unsurprising that the security of a solid financial framework of the US dollar would be chosen instead of the uncertainty of what and how may government will operate once in power. This will be true for many of the countries listed above. There is no doubt that some momentum will be carried by this sentiment this year, even if short term, it will contribute to spurts of bullish behaviour in favour for the greenback.

The elections will affect all markets not just foreign exchange. The commodity markets will also see a degree of volatility, so get ready and be prepared for an exciting year of trading.

For more information and guidance on what to trade and how-to trade be sure to visit our dedicated forums for our clients and stay tuned to all future news and information releases by Ice FX.


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