What-to-expect-How-will-US-Election-affect-Europe-and-EUR-currency What-to-expect-How-will-US-Election-affect-Europe-and-EUR-currency

What does the US Election Mean for the Euro?

The 2020 US election matters for Europe for two main reasons: trade and foreign policy.

Under Donald Trump, deregulation will likely continue creating prospects for neutral growth with a high level of uncertainty.

Joe Biden’s presidency can be slightly negative for the Eurozone’s growth due to higher regulations.

Overall, the US dollar will continue to weaken against the euro, but at a faster pace under a Democratic president.

Notice, though, that risks for EUR/USD remain as the euro area reported a record number of new coronavirus infections.

America is voting, and the whole world is holding its breath.

The upcoming US election concerns not only the American people and their economy, but all major economies as the outcome of this election will have a massive impact across the Atlantic.

Given the recent tensions in relations between the US and Europe, the old continent has a great interest in the election outcome, which may affect future relations and European growth.

Financial markets and economic outlook in Europe will be affected by who will enter (or remain) in the White House after the vote.

The 2020 election is important for Europe for two main reasons.

The first is trade; the second is foreign policy.

Let’s see how the European region will be affected if Biden wins and what will happen if Trump gets a second term? What awaits European currencies – the euro and pound?

Presidential Election: How does it affect US Economy and Markets?

Trump and Europe

From the first moment, President Donald Trump believes that the North Atlantic Treaty Organization (NATO) has been organized to “take advantage” of the United States.

He also accused several European countries of being a threat to the national security to justify imposing tariffs on EU goods.

The Europeans are currently concerned that the trade war that the US launched on China will expand to Europe if Trump is re-elected.

Relations between the two sides will worsen, which will pose a threat to the European economy with any new tariffs.

Europeans love multilateral relations – this is how the European Union works with its 27 countries.

What’s happening? US Presidential Elections and Supreme Court

Biden and Europe

Under Biden, the Europeans believe that the traditional international relations will return, as the Democratic candidate respects the European Union’s historical relationship with the US.

If Biden wins on November 3, he could reverse many of the actions the Trump administration has taken.

He wants to follow a multilateral approach like the EU and to renew rapprochement with the countries currently marginalized under Trump.

Another dominant point that will bring both sides together is Biden’s stance on global warming.

The United States and the European Union may reach a new “green deal”.

Biden pledged a $2 trillion package to combat climate change and promote clean energy.

This plan is essentially in line with the budget of the European Union and the Reconstruction Fund, which are strongly oriented towards the green economy.

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What should Europe expect from the next US president on these issues?

1. Trade between the US and EU

If Biden wins (Blue Wave: the President, the House, and the Senate are Democratic), we expect the trade tensions between the US and the EU to ease.

The US threats to the European auto industry will decrease, as well as reversing some tariffs on steel.

However, the positive economic benefit would be moderate.

Under Biden’s administration, the US might rethink its decisions on NATO, the World Trade Organization, and the digital taxes.

If Trump’s Re-election (Red Wave: the President, the House, and the Senate and Republicans), trade tensions between the States and the European Union will continue, but tariffs are unlikely to increase in the near term.

The EU will impose digital taxes unilaterally.

The Trump administration may continue to pressure the EU to support NATO and will push Europe to cut its ties with China.

This scenario is bad for both the EU and the US.

2. European currencies

The Euro:

The blue wave scenario will lead to the continued weakness of the dollar, as the Trump stimulus will be out of the scene, and taxes will increase.

That will give the euro a boost to rise against the greenback and improve its performance with Biden’s victory.

A Democrat’s full-control will help the euro to rise above the psychologically important $1.20 level.

As for the red wave, it will support the dollar, and Trump’s win will affect risk sentiment, which will strengthen the USD position as a safe-haven at the expense of the euro.

That will challenge the euro’s rise against the dollar from time to time.

The Pound Sterling:

Biden’s win will lead to a rapid drop in the dollar, which will boost the sterling’s strength against it.

If Trump secures a second term, this will be better for the dollar, and the pound will suffer in front of it, which is already struggling with the Brexit drama.

3. US and European Stocks

Biden’s victory:

The biggest winners in the blue wave scenario: the auto industry (low tariffs and supportive policies for electric cars), utility stocks, renewable energy companies, and green technology.

Meanwhile, the energy sector will face several obstacles in the form of stricter regulations.

Trump’s re-election:

Energy stocks will benefit more with Republicans in the White House and Congress, and the auto sector will be the biggest loser.

The main beneficiary in the red wave scenario is the “automation and robotics” sector, as the new trade tariffs will speed up the reshoring trend, where foreign Acompanies bring aspects of their operations back or closer to home, from both the US and European sides.

4. Brexit

The results of the US elections will directly affect the current exhausting negotiations between the UK and the EU.

If Trump remains in the White House, he may try to reach a trade deal with the UK at the expense of Europe.

Conversely, Biden’s Irish roots will make things more difficult for the UK, which could push Britain to accept European Union demands to reach a trade deal with it.

Ultimately, Europe may not have a say in the upcoming US presidential elections, but it has a big stake in the outcome.

Trump’s re-election means the continuation of the status quo, while the change of White House policy marks the beginning of a new period of US-EU relations.



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