USD: All eyes on Tuesday night’s election outcome
Last week was rough on the US dollar, which fell to its lowest levels since early October as polls for the Presidential election continued to tighten and add to the uncertainty in the market. October’s jobs numbers missing analyst expectations didn’t help matters, though the greenback did get some support from stronger-than-expected wage growth, healthy consumer spending, and low weekly jobless claims.
The greenback is starting this week off strong though, after the FBI announced on Sunday that it didn’t find anything in Hillary Clinton’s newly found emails to recommend charges, which could help Clinton in the final days of the Presidential election. Election day Tuesday could be another dramatic day for markets depending on what the polls say, though we’ll also see the September’s JOLTs jobs openings report and hear a speech from Federal Reserve member Evans before noon. Wednesday could be a market adjustment day as investors digest the election outcome along with the latest mortgage applications and wholesale inventory readings out in the morning. Thursday morning brings a speech from the Fed’s Bullard, and the weekly jobless data, which have been showing the fewest claims in decades in recent weeks. We’ll end the week with Friday morning’s consumer sentiment survey and the Baker Hughes US oil rig count. A Trump victory this week could cause heavy uncertainty and hurt the dollar in the short term as markets are still broadly pricing in a Clinton victory. That said, any negative data surprises out this week could also put pressure on the currency regardless of who wins on Tuesday.
EUR: The euro could get a boost from surprise Trump win
The euro rose for a second consecutive week against the US dollar, which continued to be held back by the tightening US Presidential race. The Eurozone’s currency was also lifted by strong manufacturing reports and fair unemployment readings out of Spain, France, Germany, Greece, and the broader Eurozone.
So far this week, a strengthening US dollar is knocking the shared currency down a peg despite retail sales out of the Eurozone meeting analyst expectations. The euro could weaken further if US polls show Clinton leading on Tuesday, though investors will also be watching for Germany’s industrial production results along with the latest trade data out of Germany and France in the morning. Wednesday morning will bring Portugal’s trade balance and unemployment data followed by the European Commission’s Eurozone economic growth forecasts out in the afternoon. Thursday morning will be heavier with industrial production results out of France and Italy, France’s non-farm payroll for the third quarter, and consumer price readings out of Greece and Portugal. Germany’s consumer inflation numbers for October are out early Friday morning. Overall, a surprise Trump win this week could boost the euro as USD investors look to escape uncertainty. Alternatively, the currency could weaken if the US dollar gains after a Clinton win, barring any unexpectedly strong results out of the Eurozone this week.
GBP: In a similar boat to the euro in a light-data week
Like the euro, the pound ended last week higher against the election-weary US dollar. That said, most of sterling’s gains came from two big events: the Bank of England’s (BoE) decision to keep interest rates steady for the rest of the year, and a surprise UK court decision that requires parliament to hold a vote on Brexit before EU referendum plans officially begin. With investors short on details for next year’s Brexit liftoff, a future debate in parliament could improve market certainty, further boosting the pound.
Sterling is off to a poor start this week as the US dollar strengthens with Clinton’s odds of victory on Tuesday. Beyond the final US election polls, Tuesday morning brings manufacturing and industrial production results for September as well as inflation report hearings and 3-month GDP estimates from the National Institute of Economic and Social Research. The rest of the week will be light, with just the UK’s trade balance data on Wednesday morning and the Conference Board’s economic forecasts out on Friday morning. As with the euro, a surprise Trump win could boost the pound as investors flee the potentially less-certain USD.
CAD and AUD: Will oil recover and lift the CAD? AUD to be tested with China trade results
The Canadian dollar ended last week flat against its US counterpart as oil prices fell below $45 per barrel for the first time since mid-September. So far this week, recovering oil prices are helping to lift the loonie even with the US dollar’s gains on Monday. We’ll see housing starts and building permits data out on Tuesday morning along with the final US polls, followed by new housing price growth readings on Thursday morning. A Friday morning speech by Bank of Canada Governor Poloz will finish out the week for data. Besides a surprise Trump win, rallying oil prices could help drive the currency higher this week.
The Australian dollar made strong gains last week against the weakening US dollar with its Election-led uncertainty. The Reserve Bank of Australia’s decision to keep interest rates steady signaled economic optimism, while positive forecasts from the manufacturing sector and strong business activity readings out of China (Australia’s largest trading partner) also gave the Aussie dollar a lift. The currency is starting this week off strong as investors wait for Monday night’s business confidence surveys and China’s trade data. Along with the US election results, Tuesday night will bring Australia’s latest consumer confidence survey and the country’s mid-year economic and fiscal outlook. The only other notable event out this week will be a speech from RBA Assistant Governor Debelle on Thursday night. A surprise Trump win could especially help boost the Aussie dollar this week, as the high-yield currency continues to be one of the world’s most attractive. Alternatively, poor results out of China could put downward pressure on the Aussie dollar.