Yesterday was a quiet day for the market in terms of economic releases. It’s a different story for today, with the decider of the US election – with it being so close to call, it is likely that we will first see the result on Wednesday. What outcomes could the winner have on markets and economic forecasting? Well, if we first start to look into a possible Trump win. Trump has said that if he wins, he will cut taxes and tariffs. This would be an injection to US inflation as there would be more disposable income for both households and businesses. A larger spending pool of funds would likely drive stock markets, bond yields and the USD higher. The affect it could have on other countries policies? Well interestingly some market analyst suggests that if Trump wins, ECB might change their tone for their December interest rate decision and push for a 50 basis points rather than 25. The reason for this is that the European Central Bank rather frontload its quantitative easing before there is possibilities of limitations and risk factors that would be protected from Trump’s policy changes.
On the other hand, if we see Harris winning the election markets suggest that USD can drop off against its peers. Main driver is that it would be more in line with the current US political agenda on tax levels and less policy changes that wouldn’t have the same effect on driving stock markets and bond yields higher.
Market has been fairly flat this morning in anticipation for the election. We did see UK BRC retail sales for November decrease to 0.3%, a steep fall from its previous number in October recording 1.7%. The forecast was that figures would come in at 1.4% for November – suggesting that there are concerns of spending possibilities, i.e. household holding off injecting money into the retail sector – with terrible weather keeping foot traffic away from high street retailers and potentially with Christmas around the corner, people could hold off their spending power for now to save ahead of their Christmas shopping.
Other than the election, there is a very important day of economic data on Thursday with both the Federal Reserve and Bank of England holding their interest rate decisions. Both central banks will cut rates and it’s looking more likely that both will do it by 25 basis points. We will know the outcome from the election and depending of how is in charge of the US could this have a different reaction from the markets on Federal Reserve’s decision and forward guidance?
GBP/EUR 1.1907 GBP/USD 1.2971 GBP/AED 4.7666
GBP/AUD 1.9609 GBP/CHF 1.1187 GBP/CAD 1.8016
GBP/NZD 2.1634 EUR/USD 1.0882 GBP/ZAR 22.6451