he Fed didn’t hit the panic button over the election after all, holding interest rates steady and signalling a December rate hike in the statement. There were 2 dissenters rather than 3 this time but overall there has been no change in Fed expectations. This suggests either the Fed still expects Clinton to win or it thinks the market impact to a Trump win would be brief and manageable.
With Donald Trump continuing to gain momentum in the polls (and the lead in some), however, traders have started to readjust their expectations and portfolios to reflect the possibility of a Trump win or a contested election. US markets spent the day under pressure dipping below but finishing near 18,000 for the Dow and 2,100 on the S&P. Failures in these levels would signal a decisive shift in sentiment.
Big changes in attitudes can be seen in other markets. USD has been rolling over, igniting a rally in gold that carried it up through $1,300. JPY, which had been lagging lately, has also started to attract defensive capital flows while resource Dollars like AUD, SGD and NZD plus GBP and EUR have capitalized on a weakening greenback.
CAD, however, has trailed its peers with the positive USD influence offset by another plunge in oil prices that took WTI down 2.5% toward the $45.00 level. A mega huge 14.4 mmbbl increase in US DOE inventories confirmed the API report from yesterday, removing fundamental support from a market already in turmoil from shifting OPEC speculation. November may be an active month for crude between the election impact on the economy, the campaign to retake Mosul, and negotiations heading into the November 30 OPEC meeting.
NZD has been the top performing major over the last 24 hours having gotten a big boost from a strong New Zealand employment report and stronger dairy sales. The Kiwi Dollar may be active today around more commodity price data while AUD may be active around Australian trade figures. Service PMI reports, particularly for China may also have some impact on trading.
Thursday, GBP could be active particularly around the Bank of England meeting. No changes to interest rates or QE is expected but commentary from Governor Carney and others could attract attention now that he is apparently going to stick around until mid-2019 to see the country through Brexit negotiations. In the US, more election speculation, factory orders and nonfarm payrolls anticipation could drive trading action.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US FOMC interest rate and statement 0.50% no change expected
US ADP payrolls 147K vs 165K
US ADP payrolls previous revised up to 202K from 154K
US DOE crude oil inventories 14.4 mmbbls vs street 2.0 mmbbls
US DOE gasoline inventories (2.2 mmbbls) vs street (1.0 mmbbls)
UK BRC shop prices (1.7%) vs previous (1.8%)
UK Nationwide house prices 4.6% vs street 4.9%
Germany unemployment change (13K) vs street (1K)
Germany unemployment rate 6.0% vs street 6.1%
Upcoming Manufacturing PMI reports:
Germany 55.0 vs street 55.1
France 51.8 vs street 51.3
Italy 50.9 vs street 51.4
UK construction 52.6 vs street 51.8 vs previous 52.3
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
11:00 am AEDT NZ ANZ commodity prices previous 5.1%
11:30 am AEDT Australia trade balance street ($1.7B)
8:30 am GMT Spain unemployment street 77K
12:00 pm GMT Bank of England decision 0.50% and QE £435B no changes expected
8:30 am EDT US jobless claims street 256K
10:00 am EDT US factory orders street 0.2%
10:30 am EDT US natural gas street 57 BCF
Upcoming Service PMI reports:
9:30 am AEDT Australia previous 48.9
11:30 am AEDT Singapore previous 52.9
12:45 pm AEDT China Caixin previous 52.0
4:00 pm AEDT India previous 52.0
7:30 am GMT Sweden street 56.5
9:30 am GMT UK street 52.5
9:45 am EDT US Markit street 54.8B
10:00 am EDT US ISM PMI street 56.0
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