Swing Voting
Hello and welcome back. We are now in the close proximity of the US election result and you can feel other matters beginning to become peripheral for markets as risk allocation is dominated by who will win the White House in just over two weeks time. Indeed, of all the unconventional elements of this political race, the news over the weekend that Elon Musk has announced a $1m give-away per day for those signing a ‘pro-US Constitution’ petition (he’s a well publicised Republican), is one of the more extreme tactics we’ve seen. Rumours have circulated that an army of lawyers are being readied on both sides so the legality of this will surely just add to their pile.
Donald Trump does appear to have the momentum again in many of the swing states and his visit to the Golden Arches over the weekend confirmed he is now fully in the final stages of campaigning mode. As Trump flipped fries, the American public are already casting their votes and markets appear to be siding with a Trump victory. The initial impact of a republican victory is widely regarded to be initially dollar positive and the Greenback is still trading strongly, also supported by the broader risk environment with stunting China growth and Middle East conflict.
It’s worth remembering, with the prospect of raising import duties and the likely downward pressure that places on global growth and upward pressure it could place on US inflation, it’s commonly regarded that a Trump victory could initially send EURUSD around 2% lower.
As we are all acutely aware it’s not only across the pond where we have an impending crucial political event. Rumours further circulated domestically this weekend around how the shape of the incoming budget will look in just over a week’s time. As expected, the NHS appears to be a likely huge beneficiary of the budget whilst a series of tax cuts are making higher earnings uncomfortable with what’s ahead next week. International markets are watching closely for how the budget is delivered and how liberal Labour will be with the fiscal rules before deciding how to further trade GBP.
The week ahead is likely to roll-over many of the same themes as we’ve been scrutinising in recent weeks. Alongside the US election and build up to the UK budget, sensitivity to news emanating from Israel remains very high and rumours are circulating again this morning that an attack on Iran from Israel could be imminent. Gold made a fresh record high on this news this morning.
Elsewhere China will remain in focus as they further manipulate policy in ongoing attempts to stimulate confidence and growth. In the more mainstream data flow it will be PMI’s that will take centre stage later in the week and watch out for the Canadian interest rate decision which could yield either a 25 or 50 basis point cut. Amidst all of this the single currency appears to have emerged relatively unscathed from the ECB decision last week as investors are trying to make up their minds around how dovish was the Lagarde press conference last Thursday. GBPEUR has remained above the key long term psychological level of 1.2000, which is notable for euro buyers as we’re about to head into this tornado of risk in the weeks ahead on both sides of the Atlantic.
Market Rates
GBPUSD 1.3037
GBPEUR 1.2009
URUSD 1.0856
Brent Crude 73.34
Bitcoin $68,933.00
FTSE 8358
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