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End of fierce US campaign, but will it lead to rancorous times?

End of fierce US campaign, but will it lead to rancorous times?

The main risk event over the next couple of days is undoubtedly the US presidential election and it is much too early to rule out a Trump victory. This is despite the FBI stating that Hillary Clinton won’t face criminal charges and consequently calming financial markets. Both national polls and state polls suggest a very close race with Clinton still slightly ahead.

However, while the Republicans seem likely to retain the majority in the House, it is going to be close who will win the Senate. Currently the markets have partially priced-in a Clinton victory. Should Trump prevail, and given that the Dollar is involved in 85% of all foreign exchange transactions daily, volatility could be extreme and extend well beyond Dollar trades. If Clinton wins, there will be a lesser adjustment as “Trump fears” will have been eradicated.

There was a stronger than expected increase in the UK’s Halifax house-price index with a 1.4% increase for October, although the annual increase slowed to 5.2% from 5.8% – the lowest rate for over three years. Whitehall insists that Article 50 will be triggered by April. However, there are still doubts whether this timetable is achievable, providing some net Sterling support, although there will also be fears that uncertainty will undermine investment and curb overseas capital inflows.

Sterling retreated to test support below 1.2400 against the Dollar as the US currency advanced strongly, while there was little change from 1.1235 against the Euro. A net improvement in global risk appetite helped provide Sterling support and the BRC retail sales data recorded a 1.7% like-for-like increase in the year to October from 0.4% previously, maintaining expectations of firm consumer spending.

The Eurozone Sentix investor confidence index beat expectations at 13.1 for November from 8.5 previously, the Retail PMI figures fell and there was a second successive monthly decline for retail sales.

Data to watch: EUR EcoFin Meeting. 3pm UK NIESR October GDP Estimate.

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