This year has been marked by surprising election outcomes in India, the European Union, South Africa, France, and the United States, creating substantial market uncertainty. In France, the recent shift from far-right to a leftist-centrist majority in the lower house of parliament has led to concerns about new spending measures and their impact on the euro.
TreasuryONE currency strategist Andre Cilliers reflects on the broader implications of these elections, suggesting that the global political landscape is being reshaped by a collective desire for change post-COVID. He notes that voters are seeking better lives and using their ballots to demand this change. The recent elections in France and the UK illustrate this trend, with France experiencing a dramatic shift and the UK witnessing a landslide victory for the Labour Party, which has moved closer to the political center. These developments are likely to bring stability to the UK, benefiting the pound, while the euro faces challenges.
Turning to the US, the upcoming November elections are surrounded by uncertainty. Current President Joe Biden faces internal criticism, and there is speculation about his candidacy. Meanwhile, recent economic indicators, such as the nonfarm payrolls, suggest continued headwinds for the US economy, potentially leading to interest rate cuts by the Federal Reserve. Despite these challenges, there are glimmers of hope, with signs of inflation easing slightly.
Finally, in South Africa, the Rand has strengthened following recent Cabinet announcements, offering some stability amidst political changes. The government’s ability to function cohesively will be closely watched, with potential positive impacts on inflation and business costs if Eskom manages to maintain stable electricity supply.