We have finally seen US election fever impacting markets, having caused a modest hit on the USD this time last week, when news hit the wires that the FBI is to reopen investigations into Hilary Clinton’s email usage. This has dominated through the week, with a variety of polls showing Trump gaining a marginal lead, unsurprisingly so in some states.
As such, the data series has been pretty secondary in nature – from the US at least – with a relatively modest response to today’s US nonfarm payrolls release. The headline number missed on expectations, but was comfortably in positive territory to maintain Fed intent on rate normalisation policy. Last month was revised higher, while unemployment was back at 4.9% with average earnings also better than expected.
The reaction in the USD proved temporary, suggesting traders were going to use any upturn in the USD to sell/close out. Away from the USD, the big news this week was the UK High Court ruling in favour of parliamentary involvement in Article 50. The BoE meeting was also pretty neutral, revising up forecasts on growth and inflation, on the back of both currency depreciation and pre-emptive policy measures taken in the immediate aftermath of Brexit. GBP has reclaimed a firm bid, and a week on from testing the mid 1.2100’s, Cable is now through 1.2500.
EUR/GBP is a little more resilient on the downside, but this is partly down to a bid EUR/USD tone intent on testing higher towards the mid 1.1100’s. In the commodity currencies, USD/CAD has been holding off on the downside – despite the negative aspects of holding USD’s – eventually breaking above the recent highs through 1.3400, but stopping firmly at 1.3450.
WTI/Brent prices have been in decline, exacerbated by source stories suggesting more disharmony among the oil producers. Into next week, post payrolls (week) is relatively light on data, but irrespective of this, all eyes will be on the US elections. Risk sentiment is clearly skewed one way, so away from the leading FX pairs, we could see some interesting moves developing in the likes of AUD, NZD and CAD – with the RBNZ rate announcement thrown into the mix as the odds of a rate cut have been reduced a touch.