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US Presidential Election 2020

Who says you can't buy this election? Learn how you can trade or hedge against high volatility - with an award-winning forex trading provider.1

Start trading today. Call 0800 195 3100 or email newaccounts.uk@ig.com. We’re here 24 hours a day, from 8am Saturday to 10pm Friday.

Contact us: 0800 195 3100

Start trading today. Call 0800 195 3100 or email newaccounts.uk@ig.com. We’re here 24 hours a day, from 8am Saturday to 10pm Friday.

Contact us: 0800 195 3100

Tips for trading the US election

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During a presidential election, volatility will often spike if the result is uncertain or close-cut. If it’s clear that one candidate will be the outright winner, markets may be more stable. This is even more true if the incumbent is expected to be re-elected. So, you should keep up to date with the latest opinion polls to reduce your chances of being caught out by the result.

* IG US does not charge any commissions to US retail clients, your only cost is the bid-ask spread when you trade. IG US is compensated through an intragroup hedging arrangements with its affiliate, IG Markets Ltd.

When is the result expected?

The result of the US election might not be know until Novemeber 6th. That's because there are a large number of postal ballots that are still to come in and tight margins in key battleground states. Beyond this date, it's possible that the result could be contested, leading to a trial in the Supreme Court.

Why is the result delayed and how could markets be affected?

Market commentary by IG Senior Market Analyst Joshua Mahony

The lack of any standout outperformer in the US election has pushed us into somewhat uncomfortable territory, with the wealth of mail-in ballots seen in the wake of the pandemic meaning that there are still enough uncounted votes left to swing the final outcome.

The common perception is that those mail-in votes will overwhelmingly benefit Joe Biden, hence Trump's decision to push for the US Supreme Court to rule out any ballots received beyond election day. While Trump will hope that his recent appointment of Justice Amy Coney Barrett will help sway any decision-making, there are doubts over the Court's willingness to throw out potentially valid votes.

Between the expected period of vote counting, and legal challenges from Donald Trump, it is clear that we will see significant uncertainty play out over the days ahead. The volatility seen in stocks does reflect this uncertainty, yet it appears that markets have remained somewhat stable despite the likely lack of any blue or red wave that would unlock a swift decision on stimulus.

USD/CNH is one of the best gauges of sentiment over who will become the next president, with the Biden polls having sparked significant yuan upside. The USD/CNH weakness in the early hours of Novemeber 4th does highlight the feeling that Biden could ultimately end up as the next president of the United States.

How could each candidate affect market sentiment?

The two candidates are very different in their approach towards information and how they share it. Trump is known to go off-script during speeches and he often takes to Twitter to voice his opinions or grievances, causing markets to react.


This can be to call out individual companies such as Goodyear Tyres or even Twitter itself, which he has accused of bias. Shares can rise and fall immediately after Trump’s tweets, which can also lend itself to an increased sense of market volatility.


Trump has also taken to Twitter to criticize interest rates set by the Fed, stating that high interest rates make life difficult for American manufacturers. That’s because higher interest rates push the strength of the dollar up, making exports more expensive. Any Tweets from Trump that indicate that USD is too strong can cause the price of currency crosses like GBP/USD and EUR/USD to fall.


Biden is generally more restrained, and his speeches and Tweets often speak of a spirit of togetherness. That’s not to say that he doesn’t have his fair share of gaffes which his presidential opponent quickly seizes on. Biden has been given the moniker ‘Sleepy Joe’ from Trump, on account of his supposed lack of energy.

That said, Biden already has more years’ experience in the West Wing than Trump ddoes, racking up eight years as Obama’s vice president. His increased experience could bring with it a larger degree of market certainty.

How to trade the US election

  1. Learn how to forex trading works
  2. Choose a currency pair
  3. Open an IG trading account
  4. Be ready to react to US election news
  5. Log in and place your trade

You can trade the election by speculating on forex pairs. US dollar crosses such as EUR/USD and GBP/USD tend to move in the run-up to polling day, and often continue to move in the fall out of the result – meaning there is opportunity to profit from the election. But, you should be also aware of potential losses, while taking steps to manage your risk.

Our rolling spot forex contracts enable you to speculate on the price of a forex pair without taking direct ownership of any underlying currencies. This gives you the flexibility to go long if you think a pair’s price will rise, or short if you think it will fall.

Markets to watch

Here are some of the financial markets that are likely to be impacted by the US presidential election.

Forex

US dollar crosses, including EUR/USD, USD/JPY and GBP/USD are likely to be volatile – as investors move to price in the effects of the probable winner’s foreign policies.

Stocks and indices

US stocks and indices including the S&P 500 and Dow Jones are expected to experience major price moves, with each candidate favouring a different approach to international trade.

Commodities

The prices of commodities including oil and gold are likely to fluctuate, in line with expectations for the country’s economic direction over the next four years.

Popular markets

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Prices above are subject to our website terms and conditions. Prices are indicative only.

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How can you hedge risk during the presidential election?

You can hedge risk during the presidential election by opening positions that will turn a profit if assets you own – such as currencies or stocks – start to lose money.

With us, you can hedge against risk by trading over 80 major and minor forex pairs including EUR/USD, GBP/USD and USD/JPY. Let’s say you are expecting to receive a large payment in euros after the election, when you plan to transfer the funds into US dollars.

However, you are concerned that USD could strengthen against the euro on the back of the election result – before you receive the payment. So, you decide to hedge your risk by going short on EUR/USD with one of our rolling spot forex contracts.

If the dollar does strengthen against the euro as you expected, the gain to your short position will help offset the loss on your currency transfer. If the dollar weakens instead, the loss on your short position will be offset by a gain on your currency transfer. As a result, you’ll effectively lock in an exchange rate on the date you open your short position (assuming both positions are equally sized).
To start hedging, open a live account with us today. Or, you can test out your theory risk-free in a demo account.

What should traders expect to see during the US election?

All US markets tend to experience increased volatility in the run up to a presidential election, including USD forex pairs, indices and commodities. That’s because many investors will attempt to lock in positions before the result is announced, using polls to gauge public sentiment. The aim is to take full advantage of the price moves that occur when the country’s political direction is confirmed.

At the top level, early indications suggest that the following could be on the cards if one of these two main candidates win:

Donald Trump

A Trump win could see an escalation of the trade war, potentially causing problems for some US exporters and having a negative impact on the value of the dollar.

However, this effect could be offset by reassurances that tax cuts and deregulation will continue – boosting the US economy.

Trump is known to go off-script during speeches and he often takes to Twitter to voice his opinions or grievances, causing markets to react.

This can be to call out individual companies such as Goodyear Tyres or even Twitter itself, which he has accused of bias. Shares can rise and fall immediately after Trump’s tweets, which can also lend itself to an increased sense of market volatility.

Trump has also taken to Twitter to criticise interest rates set by the Fed, stating that high interest rates make life difficult for American manufacturers. That’s because higher interest rates push the strength of the dollar up, making exports more expensive.

Any Tweets from Trump that indicate that USD is too strong can cause the price of currency crosses like GBP/USD and EUR/USD to rise. To seize opportunities as they arise – or set alerts to notify you of big moves – start by opening an IG account.

Joe Biden

A Biden win could see tensions in the trade war cool, providing a boost to US exporters and the dollar.

However, these effects could be offset by tax increases for high-income households, and more limited deregulation.

Biden is generally more restrained, and his speeches and Tweets often speak of a spirit of togetherness. That’s not to say that he doesn’t have his fair share of gaffes which his presidential opponent quickly seizes on. Biden has been given the moniker ‘Sleepy Joe’ from Trump, on account of his supposed lack of energy.

That said, Biden already has more years’ experience in the West Wing than Trump does, racking up eight years as Obama’s vice president. His increased experience could bring with it a larger degree of market certainty.

It’s also important to remember that the coronavirus pandemic is likely to create significant volatility over the election period. A spike in cases could see US indices and the dollar fall in value, as investors move to price in a reduction in consumer spending and economic output, while a reduction in the number of cases could see both rise in value.

How will markets react to the different candidates?

Market commentary by IG Senior Market Analyst Joshua Mahony

Stocks


Markets hate uncertainty, and historically the perception has been that a new president might bring policies that could be harmful for stocks. This happened in 2016 when analysts were confident that a Trump presidency would spark a market collapse.


But, we are now seeing that same fear creep in as people consider a Biden presidency and the potential uncertainty it could cause. Biden is openly more left-leaning, and his policies are expected to be geared towards human needs rather than those of investors and traders.


This sentiment isn’t helped by suggestions that Biden would reverse Trump’s tax cuts, and it is likely that markets will rise alongside the potentially increased chance of a Trump victory as we approach the election.

USD

The value of a currency is supposed to reflect the health of an economy and its future prospects. Many are expecting Biden to be less focused on the markets than his Republican opponent, so the dollar could weaken in the event of a Biden victory.


However, this effect could be offset if Biden is able to improve relations between the US and China after years of market anxiety. In this scenario, it would be the Chinese yuan which may benefit the most, with the trade war having sparked huge upside for USD/CNH.


Keep in mind that if the wider markets fall on a Biden victory – including US stocks and indices – the dollar would likely rally in the short-term to reflect a risk-off move as investors turn to USD.

Gold

The prospect of a more expansive fiscal policy under Biden, and from a government which is happy to embark on substantial spending programs, could provide a boost to precious metals.


There’s a caveat here too, because in the past precious metals have also followed the same patterns as the stock markets during times of crisis. So, any collapse in equity markets that may come from a change at the White House could drag gold lower in the immediate period.


Plus, while Trump has finally seen the kind of stimulus he would have hoped for, a Biden win could result in a more substantial stimulus package if the Democrats gain a foothold in Congress.

When is the US election?

The US presidential election is scheduled for Tuesday, November 3, 2020 when all 50 states and Washington DC will cast their votes. The vote spans six different time zones, so the first exit polls will be available at around 11pm (EST) when West Coast voting closes.
The election is likely to create market volatility, as US dollar crosses such as EUR/USD and GBP/USD tend to move in the run-up to polling day, and often continue to move after the result is announced. Volatility related to the election could continue until congress certifies the result on Wednesday, January 6, 2021, or even until the winner is inaugurated on Wednesday, January 20, 2021.
To find out about significant movement as it happens, you can set alerts in an IG demo or live account.

Choose IG as your forex trading provider

It’s free to open an account, and you don’t have to fund or trade until you’re ready.

Choose IG as your forex trading provider

It’s free to open an account, and you don’t have to fund or trade until you’re ready.

Choose IG as your forex trading provider

It’s free to open an account, and you don’t have to fund or trade until you’re ready.

Choose IG as your forex trading provider

It’s free to open an account, and you don’t have to fund or trade until you’re ready.

Choose IG as your forex trading provider

It’s free to open an account, and you don’t have to fund or trade until you’re ready.

Choose IG as your forex trading provider

It’s free to open an account, and you don’t have to fund or trade until you’re ready.

1 According to Investopedia's 2019 Best Brokers Awards. To determine award winners, Investopedia's team evaluated more than 70 online brokers, considering thousands of variables across trading technology, mobile capabilities, user interfaces, research tools, costs and fees

2 IG US minimum spreads are lower than Forex.com, Oanda, or TDAmeritrade minimum spreads across the top 4 traded currency pairs (EUR/USD, USD/JPY, GBP/USD, AUD/USD), as observed on July 8, 2020. IG US minimum EUR/USD spread is at least 20% lower. Excludes competitors' commission-based products.

3Awarded Top Customer Service Provider in the US by Investment Trends August 2019 US Leverage Trading Report (Margin Forex). The survey was conducted by specialist researcher Investment Trends (https://investmenttrends.com/who-we-serve/)