It’s been almost a week since the polls closed in the US presidential election, and although there has been no official announcement by the Electoral College, the US news networks have called Joe Biden as the next US President. Before the vote, Joe Biden was predicted to have won by a considerable margin, but it appears that the polls were – once again – off, leaving people to wonder how reliable they might be in future elections. Let’s take a look at what we know so far and what effect this could have on your currency transactions.

What we know so far …

The election was held on Tuesday 3 November and, after a delay in counting that lasted several days, former Vice President Joe Biden was declared the winner. The winning candidate must secure 270 electoral votes or more in order to win the White House, and as of today the tally stands at 290 for Biden and 214 for Trump. If the Electoral College confirms this then Joe Biden becomes the President Elect of the United States.

What caused the hold up?

The counting of the vote was stopped in several states while they awaited the arrival of mail-in votes, which were permitted in this election. With around 100 million Americans casting early votes, that’s a lot of counting to do. Mail-in votes, or absentee ballots, have gained in popularity in the US due to Covid-19 measures. President Trump has claimed that there is evidence of fraud in terms of votes cast and has assembled a legal team to dispute some of the results in key states.

How are the markets reacting to all this?

Stock markets have rallied since the election, with the US tech heavy Nasdaq index soaring over 7 percent. The key reasoning behind this is the Democratic Party’s promise to unleash a flood of monetary stimulus measures, which would boost stock prices.

At the same time, yields on US treasuries have also been soaring as the bond market balances out, while the US Dollar index has slumped. Again, the main driver for the Dollar slump was the presumption that Biden would be declared winner, causing a move into riskier currencies and away from the safe haven USD. The Euro has gained a cent against the Dollar in the last week.

What could happen next?

Donald Trump has assembled a legal team to tackle what he says were irregularities in the voting procedure. Specifically, he has filed lawsuits in Georgia, Michigan and Pennsylvania to contest the vote counts, and called for a recount in Wisconsin citing “shenanigans”. We should know soon whether Trump’s legal actions are likely to be successful, and whether things will end up in the Supreme Court. At the same time, however, several key Republicans have urged Donald Trump to drop any lawsuits and admit defeat.

What does this mean for the value of the Pound?

The Pound has risen three cents against the US Dollar since the election as the greenback has weakened. As long as the markets consider Joe Biden to be the president elect this strength is likely to continue, although if President Trump’s legal efforts look as if they could lead to a reversal then we can expect to see a Dollar turnaround.

By the same reasoning we are likely to see risk appetite continuing to increase, which would further benefit the Pound. On the other hand, even if President Trump’s legal efforts are not immediately successful and it appears that we may head into a prolonged period of deadlock regarding who won the election, risk appetite could be hit, meaning the Pound would likely depreciate against the Dollar.

It is worth bearing in mind that the main rival of the US Dollar is the Euro, so any weakening of the Dollar will have an inverse effect on the shared currency. This means the Euro is likely to continue strengthening on Forex markets unless it is undermined by some other factor, such as a sustained rise in Covid-19 infections or more signs of deflation in the Eurozone.

How to protect your currency transfers from volatile market swings

If you’re concerned that there may be more volatility ahead as the fallout from the US election rumbles on, you may want to think about how you can protect your currency transfers during these uncertain times. Even a 1 or 2 percent swing in the value of the Pound can have a big effect on the amount of foreign currency you receive and can add up to a lot if you’re making a big purchase such as buying a house or car.

One way you can avoid taking on this risk is by using a reputable currency provider such as Currency Solutions, who can help you hedge against the risk of choppy currency markets. It’s really simple to do and it can protect your money from unexpected shocks on the Forex markets. If you want to take advantage of the cover we can provide, just contact us today and we’ll advise you on how we can help.