As politicians pursue their legislative agendas, they make significant moves that can influence currencies.

With the upcoming Nigerian election on the horizon, now is a good time to assess how much policy announcements impact on forex rates.

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In this post, we’ll take a close look at President of the United States, Donald Trump and President of the European Commission, Jean-Claude Juncker, analysing how they have shaped the EUR to USD market and what this may mean for Nigerian investors.

President of the United States of America – Donald Trump

Research has shown that all world leaders have the ability to influence forex rates, such as EUR/USD. As a result, ever since Donald Trump took office, we have seen large levels of volatility in the EUR/USD currency pair. For example, when Mr Trump fired James Comey as the Director of the FBI while he was investigating ties between Russia and Trump, we saw sharp rises in the EUR to USD immediately following the announcement, followed by steep falls against the euro in the days that followed.

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Likewise, in 2018, when the President proposed a $4.4 trillion spending plan that included cuts to social welfare programmes and increased spending on the military and infrastructure, he also announced that there would be an increase to the deficit as a result of the spending. Following this, the USD fell against five currency pairs.

Additionally, when President Trump announced tariffs on Chinese goods, alongside the threat to add hundreds of billions of dollars more to pressure China into changing its trade practices, we saw high volumes of market volatility, ultimately leading to a sharp rise in the dollar against the euro.

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President of the European Commission – Jean-Claude Juncker

President Juncker came into the public consciousness for many following the Brexit vote of 2016. When he visited UK Prime Minister, Theresa May in May 2017, he allegedly told the Prime Minister that he was leaving Downing Street “10 times more sceptical than before”. As a result, as the EUR/GBP pair plummeted, we saw substantial growth in all other pairs, including EUR/USD.

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In March 2018, we also saw Juncker and Trump collide over policy, as Mr Juncker composed the EU’s response to President Trump’s plan to impose tariffs on EU goods entering the US. In announcing tariffs for US goods in response, the euro enjoyed growth against all major currency pairs.

A deal was struck in June 2018 to end the ‘trade wars’, with the two agreeing to avoid any further escalations and issuing a joint statement to confirm that they were working together to try and find a way to create tariff-free trade on non-auto industrial goods. Due to the stability provided by the statement, the currencies stabilised, with the euro gaining slightly against the dollar.

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From these two case studies, it is clear to see that our political leaders, including President Trump and Jean-Claude Juncker, have an ability to heavily influence their respective currency pair. As a result, in times of intense geopolitical activity, it can be hard to produce a EUR/USD forecast. With the current political uncertainty in Nigeria and Brexit looming on the horizon, now may be a good opportunity for Nigerians to diversify their portfolios.