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As the second round of FBI investigations into Hillary Clinton‘s use of a private email server continue, the latest ABC opinion polls show Donald Trump with a ‘slim’ one point lead over his Democratic counterpart.
What impact has this 13% swing in voting opinions had on markets? Below is a round up of the performance of two key market indicators today.
Whilst the strength of the US Dollar after the conclusion of the Presidential debates may have been increasing at its fastest rate since the US Federal Reserve raised the base rate of interest almost a year ago, today has seen the USD Basket Index continue a run of daily losses that started when the investigation was announced. Now down to its lowest level in two weeks,
The most popular FX gauge of the current election has been the US Dollar/Mexican Peso index, nicknamed the ‘Trump Thermometer’, with commentators noting price of the Peso often reflects the prospects of the Republican candidate. On this morning’s news, the Peso has collapsed dramatically, down over 1% since 11:30am. However, this pales in comparison to the 1.8% change in the market on the announcement of the reopening of the email investigation, suggesting that today’s poll has been less influential on markets as a whole.
Against the Euro, the greenback is now at its weakest in almost three weeks, suggesting that investors see the the possibility of a President Trump rising fast. Against the Pound, however, is the buck is maintaining its strength, suggesting that markets may not be backing a new horse after all.
It is worth noting that the election is not the only major risk event currently affecting the Dollar; tomorrow’s meeting of the Fed’s FOMC to decide on US monetary policy is likely to be driving the short term prospects of the Dollar just as much, if not more, than the current electoral race.
Gold is the big mover of the day, having rallied over $12 so far. Note, however, that the precious metal was already $7 up, therefore equating the Trump news to a $5 swing. Long seen as a safe haven asset by investors looking to hedge against uncertainty, today’s rally suggests that markets are pricing in the potential for a Trump presidency, something that only three weeks ago seemed an impossibility.
Breaking out of four week rising highs uptrend resistance, gold is now at its highest level since October 4 when prices crashed over 4%. Yet the price of the yellow metal remains almost $80 per ounce below its 2016 peak, once again suggesting that this poll has not rattle markets too significantly.
By consulting the indicators (by no means a crystal ball), it seems safe to say that the market is yet to assume that President Donald is a dead cert, but neither is Hillary. With many verging on definitively calling the election in Clinton’s favour only a week ago, in the most divisive Presidential races in decades the tables have turned once again.
The race is hotting up and markets have shaken off complacency to once again remain in the balance.
Henry Croft, Research Analyst, 1 November
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