But market history shows that such assumptions are largely a myth. “Looking back at the movement of the trade-weighted USD in the 90 days after each of the last 10 elections suggests no systematic advantage for the USD under a Republican president,” declares Wu, who notes that 30- and 60-day time horizon studies yield a similar conclusion.
Despite conventional wisdom dictating that a Republican president is better for the US Dollar (USD), OCBC FX strategist Terence Wu observes that a Democratic victory may not be as USD-negative as one might think. A Biden victory in the November Presidential elections paired with a Republican senate, he says, will prove the best case scenario for the greenback.
The assumption that a Republican president is better for the USD stems from the GOP’s reputation for better fiscal management and foreign policy hawkishness. The latter is particularly key in the presently uncertain geopolitical landscape, where US-China tensions have reached their lowest point in decades. US macroeconomic outperformance due to better economic management coupled with a flight to safety from geopolitical uncertainty, so the logic goes, could see a second Trump administration prove a net positive for the US Dollar.
