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Markets in anticipation over US election

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Pound Sterling

The Pound continues to be strong against the Euro after touching a one-month high at the end of last week. The increase is due to signs of improvement in the UK economy and expectations for more monetary stimulus being dampened. The UK has pulled itself out of recession and construction activity rose to a better-than-expected level of 50.9 in October.

Against the US Dollar the Pound fell for a fifth week due to strong jobs figures providing a boost to the US economy. Volatility could enter the markets over the next few days, with the outcome of the US Presidential election causing uncertainty.

US Dollar

The ‘Greenback’ strengthened last Friday due to the release of a better-than-expected Non-Farm payrolls report that signalled that the US economy is improving. The currency made gains against the Japanese Yen, Euro and Pound.

The most important news for the US currency this week will be Tuesday’s presidential election. It is expected that investors will shift their funds to riskier assets if Mitt Romney defeats Barrack Obama.

The Euro

The Euro has fallen to a two-month low against the US Dollar and slumped to a one-month low against the Pound due to renewed uncertainty over the Euro crisis as Greece faces an important parliamentary vote later today. Greek politicians today decide whether to endorse embattled Prime Minister Antonis Samara’s latest austerity measures. A Yes vote will see the bill enacted, and Greece receiving the latest round of much needed bailout funds. A No vote would see the bailout funds not being granted, and could lead Greece to bankruptcy by the end of the year. Such a situation will no doubt lead to mass unrest and shake confidence in the Euro.

Australian Dollar

The ‘Aussie’ is trading lower today due to the markets waiting to see whether the Reserve Bank of Australia will cut interest rates on Tuesday. Analysts are predicting a 50-50 chance that the rate will be cut by a quarter of a per cent. The currency received a slight boost due to the release of better-than-expected retail sales data with the amount of sales rising by 0.5% in September.

New Zealand Dollar

The ‘Kiwi’ has firmed its gains due to the markets being divided on the chance that the Bank of Australia will implement further interest rate cuts. The New Zealand Dollar is trading positively but tomorrow’s US election result could send it in either direction depending on the result.

Canadian Dollar

The ‘Loonie’ jumped to a one-month high against its US relation as it outperformed all other major currencies after data showed an improving picture for the US economy. The currency largely ignored a poor domestic employment report instead focusing on the US data. The currency hit its strongest level since October 25th, even though the US Dollar itself rallied to a two-month high against a basket of currencies after the release of the US jobs numbers. This morning the currency is expected to retreat slightly due to the falling price of crude oil and the uncertainty over the outcome of the US Presidential elections.

South African Rand

The Rand hit a one week low against the US Dollar after the ‘Greenback’ received a boost from the better-than-expected jobs data released last Friday. Local strikes which have hit output in the world's biggest producer of platinum are still on investors' minds, but should take a back seat this week to the U.S. vote and other global events in influencing the Rand.

With the results of the US Presidential election set to be revealed later in the week we can expect the Rand to soften further as investors grow nervous about the result.

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