FX Reactions to 2024 Global Elections

In today’s interconnected world, foreign exchange (FX) markets play a pivotal role in shaping economic conditions and investor sentiment. In a year where nearly half the world’s population live in countries that are holding or have held elections, understanding the impact elections can have on FX markets is key. For domestic consumers, the local currency means purchasing power; to foreign investors, currency is an added risk exposure; to traders, currencies offer innumerable speculative opportunities.

In this article, we look at FX market reactions to key global elections held this year, including the 2024 U.S. presidential election. Through this time of transition, Cboe FX continues to lead with transparency and deliver reliable, innovative solutions to our global clients.

2024 Global Elections

This was a record-breaking year for global elections. More than 70 countries will have held national legislative and/or executive elections by year-end 2024. 

^{Source: CNN}

^{Source: International Foundation For Electoral Systems}

The changing political landscape in Europe became evident during the summer’s European Parliament elections. On June 9, Germany saw the right-wing CDU/CSU party win majority control of the Bundestag. Meanwhile, in France, the left-wing New Popular Front (NFP) – an alliance formed after President Macron called a snap election – gained majority control of the National Assembly. These and other election outcomes across Europe triggered a surge in FX market volatility, as investors assessed unexpected political shifts and their potential implications for the region’s governance and economic stability.

Cboe EuroCurrency Volatility Index

^{Source: Cboe}

In India, the world’s most populous country, general elections took place from April 19 to June 1. The National Democratic Alliance (NDA) won, securing a majority and re-electing Prime Minister Narendra Modi. With this win, Modi became the second leader in modern Indian history to serve a third term as Prime Minister. On June 4, while the votes were being counted, the Indian Rupee (INR) closed at 83.53 against the U.S. Dollar – marking its worst single-day percentage decline (-0.47%) since February 2023.

^{Source: TradingView}

Also, in June, Mexico made history by electing Claudia Sheinbaum as the country’s first female president, joining the ranks of just 26 female leaders worldwide. Following the landslide election, the Mexican Peso (MXN) experienced its worst week in four years as it fell by more than 7.5%. The sharp reaction from the peso was yet another example underscoring the need for investors to focus on risk management and have a solid grasp of their currency exposures when political outcomes with years-long implications are being decided. 

^{Source: TradingView}

Leading up to the closely watched U.S. presidential election on November 5, when Americans voted between Democratic candidate Vice President Kamala Harris and Republican candidate former President Donald Trump, investors actively anticipated how the outcomes might influence different asset classes, sectors and regions. In the past, market uncertainty and implied volatility have tended to ramp up in the time leading up to U.S. presidential elections, only to decline once the outcome is known - 2024 was no different.

^{Source: Bloomberg; Cboe}

Markets thus far have taken the ‘stronger dollar’ viewpoint, with the US Dollar Index – a measure of USD against a basket of currencies – rising more than 1.5% the day following the election. But its prospects remain unclear. President-elect Trump’s ability to implement some of his proposed policies like higher tariffs are prospective catalysts for a strengthening dollar. But while his policies are generally viewed as conducive to a strong dollar, during his first term as president, Trump lamented the strong dollar as a negative due to U.S. exports being more expensive.

^{Source: CNBC}

Cboe FX During the Election

At critical times like these, Cboe FX continues to provide market participants a transparent and liquid platform to trade efficiently. In periods of high volatility, like those seen leading up to and following elections, Cboe FX offers deep liquidity and reliable price discovery.

Cboe FX handled significant volumes on Wednesday, November 6 following the 2024 U.S. election, setting records for spot full amount trading of $32.7 billion, $1.1 billion more than the prior record, and NDF trading on Cboe SEF of $3.1 billion, surpassing the previous record by $0.6 billion. Overall spot volume was the second biggest day on record.

Our infrastructure and advanced tools enable traders to minimize execution risk and respond to market movements quickly and confidently. In August 2024, total Cboe FX daily volume exceeded the $100 billion mark for the first time, with spot volume reaching a new high-water market at $97.5 billion.

As capital markets react to political shifts, Cboe FX remains a key resource for market participants, offering the liquidity and stability needed to navigate volatile conditions. The platform continuously demonstrates its resilience, capacity and ability to support efficient, high-speed execution, ensuring traders can respond quickly and confidently.

^{The information provided is for general education and information purposes only. No statement provided should be construed as a recommendation to buy or sell a security, future, financial instrument, investment fund, or other investment product (collectively, a “financial product”), or to provide investment advice. • © 2024 Cboe Exchange, Inc. All Rights Reserved.}