Morning Report: 08 November 2016

8th November 2016 By: Ranko Berich

US ELECTION:  The US Presidential Election is today, with results expected in the early hours of tomorrow, or later depending on how close the race is. Market conditions will be more volatile than normal in the run up to and after the outcome. As we experienced with Brexit, FX rates are likely to trade in wider ranges. Market orders should be placed shortly to take advantage of any adverse movements. Monex Europe’s trading, support, and market analysis teams will be manned in London overnight to monitor markets and handle client trades. Should you have any questions, please contact the dealing team on +44 20 3650 6320.

GBP:  Sterling pared its gains from last week over the course of yesterday, but has seen a slight bump this morning. Attention remains firmly focused on today’s US election, and volatility was very low overnight on FX and other markets including equities and fixed income. Today’s sterling releases have therefore been met with a muted reaction, as Manufacturing Production rose 0.6% in September. This is consistent with positive survey data which has been coming from the manufacturing sector, suggesting the weaker pound seen in the aftermath of the EU referendum is indeed having an impact. Industrial Production, which includes output from mines and utilities as well as manufacturers, fell 0.4%. Today at 15:00 GMT the NIESR will release its Gross Domestic Product growth estimate, although by then the US election will be in full swing is likely to be in the spotlight. Bank of England Chief Economist Andy Haldane will speak at 17:00.

EUR:  Yesterday’s “relief rally” saw the euro sell off against USD as markets relaxed slightly on improved polls for Hillary Clinton, but the single currency is again up slightly against the dollar this morning, while remaining roughly flat against sterling compared to the start of the week. Yesterday’s data included a surprisingly strong print on the Sentix Investor Confidence Index, and a slightly smaller than expected contraction in monthly eurozone Retail Sales. This morning German Industrial Production data has been released well below expectations, showing a 1.8% contraction after last month’s 3% expansion. German and French Trade Balance data showed larger than expected deficits, despite an improvement in exports in Germany. European finance ministers will meet today, although with the US election sucking up all attention the meetings may pass without incident.

USD:  Today is a historic day for the United States, and the next 24 hours have the potential to be very significant indeed for the US dollar. Based off the last week of price action, it seems market participants perceive the election of Donald Trump as a risk for the US dollar. This is certainly consistent with some of the candidate’s campaign promises, which include soft capital controls on the US dollar for the purposes of shaking down Mexico, the United States’s second largest export market, for a payment to build a border wall. Polls seem to favour Hillary Clinton, but if 2016 has taught us one thing, it must be that nothing is certain on voting day and so the potential for USD volatility must be treated as exceptionally high over the next 48 hours.

CAD:  After a volatile start to the week in early hours trading on Monday, the loonie stabilised yesterday and had a relatively uneventful day, and is now trading up slightly versus USD. Today at 13:15 BST monthly Housing Starts will be released, followed at 13:30by Building Permits and at 16:20 by a speech from the Bank of Canada’s Lawrence Schembri.


UK news

Reuters:  At long last, Americans decide between Clinton and Trump. Democrat Hillary Clinton and Republican Donald Trump face the judgment of the voters on Tuesday as millions of Americans turn out on Election Day to pick the next U.S. president and end a bruising campaign that polls said favored Clinton. In a battle centered largely on the character of the candidates, Clinton, 69, a former secretary of state and first lady, and Trump, 70, a New York businessman, made their final, fervent appeals to supporters late on Monday to turn out the vote.

Reuters:  Industrial output falls in September, but manufacturing picks up. British industrial output fell unexpectedly in September, pulled lower by maintenance at North Sea oil and gas fields, but manufacturing growth picked up, official data showed on Tuesday.

FT:  US election and markets: watch the dollar, US stocks and the peso. Dollar, Mexican peso and S&P 500 will be major barometers as votes are counted. This election should be one that embellishes US Treasuries’ reputation as the best place to park your money during times of turmoil. Yields have nudged lower this month and, if Donald Trump does win, don’t rule out a further move down as investors rapidly price in one of the least predictable occupants of the Oval Office in recent history.