How Will The U.S. Election Affect the $USD?

It's a natural question, right? What's going to happen if Obama is re-elected? What will happen if Romney wins?

Here's what is going to happen:

No matter what you think about either man, no matter what you have been told, neither of these men is going to balance the United States budget anytime soon. Neither of these men can prevent a war / hot conflict with Iran. 

But I'm already off topic. Let's get organized:

If Obama Wins

The United States will run deficits of $500 Billion to $1 trillion for the next five years. Interest rates will rise on that debt. Taxes will go up in the U.S. Servicing the debt will become more difficult.

If Romney Wins


The United States will run deficits of $500 Billion to $1 trillion for the next five years. Interest rates will rise on that debt. Taxes will go up in the U.S. Servicing the debt will become more difficult.

Do you see the stark difference between these two men? 

I didn't think so.

Romney will increase defense spending and cut tax rates. This will increase the deficit. Please do not talk to me about supply-side economics. Just get off your economic high horse. Bringing in less revenue (by lowering taxes) does one thing: IT BRINGS IN LESS REVENUE. And spending more on ANYTHING does one thing: IT INCREASES SPENDING. An increase in spending with a decrease in revenue is NOT HOW YOU BALANCE A BUDGET.

Obama will increase stimulus spending, including public works projects, education (in particular college loans and grants). He will probably increase defense spending in a conflict with Iran. He is not known for spending less. He will most likely let the Bush tax cuts expire. This will bring in more revenue. But he will probably spend more money than Romney, so he's still going to run deficits. Huge ones. 

Either way you slice it, the U.S. is in a debt hole big enough to hold three Greeces, two Spains, one Italy, and a few Portugals. When you run massive deficits, you might not really "bankrupt" your country, but you will spook investors. Spooked investors require higher interest rates. Higher interest rates can slow an economy. A slower economy can depress the currency.

So I'm dollar bearish in the big, big, big picture. But who cares. I'm going to keep looking for trades day in and day out. 

Happy Monday.


Views: 2490

Comment by Haitham653 on October 22, 2012 at 8:31pm

Hello Rob and thanks for your post....

I agree with you but not 100%, what you have said is completely right, but this is one side of the story! Not everything!!!

Do you know why the EURUSD gained the last September!! 

Basically the EURO didn't rise; the USD fell because of rumors and fears!!! 

Fears of what?!!!

Fears that Obama might leave the white house, since Obama doesn't make a good progress in the past 4 years!!!

Because of fears that Obama might leave" the EURO gained almost 700 pips within 2 weeks!!!

Imagine? What would really happen if Romney wins!!! 

As well known, foreign policy always affects the local economy in one way or another!

So policy always affects the fx market, basically it affects everything in life!!!  

The last week Romney threatened that he would punish China for manipulation the currency market!!!

Also said, he would contact with U.S. allies in the Middle East to support the free army in Syria...etc

Anyway, If Romney wins, he would not only affect the fx market, he would affect the whole world and change it 180 politically then economically!!!!

Big players and investors are aware that the long term policy of Romney would do nothing but adding more obstacles to the U.S economy!!

If you wanna compare, economically Democrats are much better than Republicans!

However, May be Obama is not an angel, but sometimes leaving things bad is better than make it much worse!!

I believe that Obama do have winning cards, he probably hides his joker to surprise and knock out Romney at the last round!
Let's wait and see!!!

The last EURO summit was not really for EURO zone, it was for the U.S presidential election!!!

EU leaders met to examine all possibilities and options about Obama and Romney!

Once the U.S election is over!! Another summit will be on the horizon!!!

Till that time EU leaders won't make any important decisions related to the EURO Zone!! 


Technically, no one could predict the market now but most likely the EURO would continue gaining till the 5th of Nov!!

My personal view , If Romney wins , investors would lose trust in the USD then, the EURO will gain and end year between 1.3200/1.3500 !!!

If Obama wins, trust will back again to the USD, most likely the EURO will end year between 1.2800/1.2400!!

Best Regards


Comment by Romano on October 23, 2012 at 8:59am

I agree with this article but there is also fiscal cliff problem that could cause cascade like in 2008 but in long term surely this will happen. You can have bad system(EU) but as long as u have trade surpluses u can kepp going with it, which is something US cant achieve even with all its benefits(weak currency, petrodollar, ...). 

Of course, some serious violent protests that would trigger emergency and force breakout from euro or some country giving up on it(Finland?) would shift the course imediately.

Anyway, those that still can profit in these times when NOTHING works anymore and EVERY side heads for dissaster, with at the same time HFT scams AND credit swaps/lines screwing price action are nothing but a true elite - kudos.

Comment by Rob Booker on October 23, 2012 at 10:44am

Peter, thanks for reading! Every day we show up and we trade based on what we see, not what we fear, not what we think will happen in 2 months, not what might happen if something else happens that will make something else happen. We trade what is happening now.

Haitham, you seem to know a lot about the inner workings of the market and even the topic of discussion at private EURO summit meetings. This is a level of intelligence with which I cannot compete, so I will let your comments stand on their own. I have nothing to add.

Romano, it's a fiscal cliff no matter who gets elected. No matter who is chancellor, emperor, dictator, president, prime minister - we are all on a fiscal cliff and we are going to fall off of it together.

Comment by Romano on October 23, 2012 at 10:58am

What I meant Rob is that, at least in short term fiscal cliff should trigger heavy dollar appreciation, unless its very significally mitigated or they just cancel those laws in effect which in turn would make $ lose its safe haven trust completely and thus: depreciation.

Comment by Rob Booker on October 23, 2012 at 2:46pm

Romano, yes - we agree very much on this point. Happy Tuesday!

Comment by Haitham653 on October 28, 2012 at 4:02pm

I just wanna clarify a point ; I do not care the previous U.S. elections, each time period has its own circumstances !

I have built my expectations based on the current conditions of the United States and the European Union in particular and the world in general !!

How Will The U.S. Election Affect the $USD?

My answer is two words:

Obama = peace

Romney = war 

Now let experts analyze how that would affect the USD !!!


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