Forex Investment and Currency Trading

Currency markets have been hammered by the ongoing credit crisis, distracting investors to some extent from Tuesday’s US Presidential Election. Historically, a Democratic Presidency with a Democratic Congress has been negative for the USD in the past, while a Republican Presidency with a Democratic Congress has also been negative for the USD. In any case, whoever wins this week will face bleak near-term economic prospects. The US budget deficit is likely to expand significantly. Fundamentally, the policy combination of looser monetary and fiscal policies is offsetting for the exchange rate. Near term, de-leveraging and repatriation may continue to support the USD, but further out in 2009, the outcome of this week’s election may lead to significant USD weakness.