The Final Stretch
Hello and welcome back. We’ve spotted a quote circling from the 1960s in recent weeks and it seems too apt to ignore.
Harold Wilson, the British Prime Minister in 1964, once said, “a week is a long time in politics,” and as we reach the crescendo of this fascinating US election race, who knows what the next few days will bring.
The weekend brought an appearance from Harris on the Saturday Night Live prime time TV programme and Trump firing an odd tirade on the media at a rally, which appears to have hindered his run to the finish line. The campaigning and verbal jousting is almost done, and the race still looks too close to call.
Early morning Wednesday (UK time) will yield the initial exit polls, which the market will likely treat as their first prompt to react, whilst the timing of an actual result remains hazy, particularly when nominee Trump is involved. Indeed, it could drag through to the weekend or even longer to reach a result, and the volatility of reaching a consensus victory only adds to the anticipation. The world will watch and react to who becomes President, but it’s important to remember that for markets, it will run deeper than this as the split between who runs the Senate and the House of Representatives will have an enormous impact on the freedom to operate and pass legislation for whoever takes their seat in the Oval Office from January.
The Trump trade has been hit significantly in recent days as the polls suggest that the race is going to be extremely close, with betting markets now actually favouring Harris as she appears to be on track to win swing state Iowa.
The dollar has sold off since mid-afternoon on Friday due to this, with EURUSD knocking on the door of 1.0900 and GBPUSD back up flirting with 1.3000. This move gives strong insight into what can be expected based upon the result in the next few days. A Trump victory is likely to lead to a resurgence in the Greenback, whilst a Democrat victory should lead to a risk relief rally which will trigger dollar weakness. It’s important to zoom out for a moment and acknowledge that we saw some extraordinary jobs numbers across the pond on Friday, with Non-farm payrolls posting only 12k due to recent bad weather. With such focus on the election, the figures have largely been dismissed, but don’t forget we have a Fed decision on Thursday night and interest rate projections linked to a weakening jobs market will have a major influence on the value of the dollar.
It says something about the week ahead when a Bank of England live meeting only makes the footnotes. It’s almost certain we will see a 25 basis point cut to 4.75% in the UK, and as the dust settles on the US election, it’s a certainty that monetary policy will come back into view, so we will watch closely for the voting split and any hint of how the MPC’s view has changed on the trajectory of future cuts after last week’s Autumn budget and the moves in the GILT market signalling higher borrowing costs.
Market Rates
GBPUSD 1.2982
GBPEUR 1.1917
EURUSD 1.0799
Brent Crude 72.62
Bitcoin $68,475.00
FTSE 8248
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