The Mexican Peso has been a good guide to market thinking on the US election. It's sharp jump this morning suggests stock markets will remove some of the "Trump risk premium" but stop well short of a full risk on move before the election.
The Mexican Peso has traced Donald Trump’s fortunes in this election campaign. This morning it has rallied sharply (US Dollar/Mexican Peso down) but has not yet broken the medium term trend line or 200 day moving average.
If the Peso is any guide, the stock market will also have a much better day than looked likely before release of the FBI’s latest letter on the Clinton emails.
Markets are likely to remove some of the risk premium taken as a precaution against a Trump victory now that Hilary Clinton will not be charged over her use of a private email server. However, an element of uncertainty remains over this election. It seems unlikely that markets will make a full “risk on” move until Clinton is declared the winner.
Solid US jobs data and improving wage growth makes a December rate hike by the Fed look pretty much baked in should Clinton become President. This may serve to temper the extent of any post-election rally if she does win.
The FBI letter may also improve the prospects for Ingham’s market debut today. With TPG having reduced the IPO price, the stock will come to market with more positive market sentiment. While Ingham’s is a major player in a staple industry, this is a mature market and a stock that will be reliant on productivity gains and cost cutting to achieve growth targets. Ingham's (ING: ASX) is due to begin tradng at 12pm AEST