Barack Obama was elected President of the United States last night with an overwhelming mandate in the Electoral College. Previously safe Republican states swung to Obama and once the exit polls started to roll in it was not a case of if he would win but by how much. The importance of this election cannot be overstated and President Elect Obama will face more challenges in his first term than any president since FDR who took office midway through The Great Depression; his administration is one of the most admired and let’s hope the 44th ‘leader of the free world’ will be able to create the same impression.

An Obama presidency is likely to be positive for the dollar in the short term; his plan to deal with the economic crisis is much more succinct than Senator McCain’s and with the Democratic Party’s new majority in the Senate, legislation should be easier to pass, filibusters aside. In the long term however we believe that the Obama administration will see a weaker US dollar as typical Democratic protectionist and trades union policies are enacted.

The volatility of FX markets continued yesterday with dollar sliding against sterling with GBP in turn losing ground against the euro. Oil prices jumped by 10% yesterday as reports filtered through that Saudi Arabia have decided to cut output by 900k barrels a day. This combined with a precipitous drop in US factory orders told for the USD yesterday although the election has bucked it up in early morning’s trade.

The euro’s move higher is somewhat paradoxical however. The ECB will probably cut rates by 50bps on Thursday with a further sign being yesterday’s fall in factory gate prices. Normally you would see some weakening; the only reason for the euro strength is more than likely the increased risk appetite that markets enjoyed yesterday.

Today’s news cycle will undoubtedly be dominated by the Presidential Elections however we have a lot of key data. UK services PMI will likely shadow yesterday’s construction figures while BRC shop prices, an inflation indicator, should also fall. European retail sales are also due alongside US ADP employment change.

Please feel free to contact me (jeremy,cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our:

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Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.

Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.