- UK Parliament must agree on timing of Article 50
- Trump and Clinton neck on neck in polls
- Market volatility on today’s Non-farm payrolls
An extraordinary week ahead for the US Dollar
Something big appears to be brewing in the markets this week and next. On one side we have the upcoming FED interest rate decision in December, which markets have been waiting eagerly for since December of 2015, when the FED promised 4 hikes in 2016.
On the other side, the US elections which from the beginning looked like an easy victory for Hillary Clinton. Perhaps not a favourite democratic frontrunner amongst some but a political champion in comparison to Trump. In fact, markets were so certain of a Clinton victory Irish bookmaker Paddypower paid out to the millions that bet on Clinton, unknowing of what was yet to unfold.
If you trust polls, which have been entirely unreliable in 2016, Clinton’s lead over Trump has narrowed enough to spook markets. And why wouldn’t they? The same predicament happened when the UK opted out of the EU back in June, markets are not willing to make the same mistake twice.
Pound to US Dollar exchange rates hit 4-week high
The Pound has managed to recoup some of its post-Brexit losses but in most part due to yesterday’s Brexit ruling from the High Court. With Theresa May unable to invoke Article 50 without Parliamentary backing, concerns for a hard Brexit could diminish.
In fact, Brexit could be stopped completely if Parliament decide that the consequences would be damaging for the UK and its relationship with the rest of the World. If this was to materalise we could see Sterling moving back to its pre-Brexit levels.
In any event, with Parliament in control of the Brexit decision markets can breath some sigh of relief at least in the short term, and the Pound could continue to bounce back against the US Dollar as we approach next week’s US election.
Today’s Non-farm payrolls and Unemployment rates could be important for the FED
Today’s Non-farm payrolls will be an important release for the FED, as markets gear up for a potential hike in December. Much of this could depend on the outcome of next weeks US election results. Shortly followed by unemployment rates which are expected to show a decline of .1%.
Assuming positive data today and a Clinton victory, I am expecting the FED to hike rates at their December meeting. In the mean time, the Pound could continue to crawl back its post-Brexit losses as we approach election day.