The USD was back in focus to open the week, markets opened up with a surging USD, the greenback gapping open up over .8% as details emerged the FBI found no additional “criminal” information in emails which caused them to re-open investigations into Hilary Clinton, they stand by their initial judgement and there will be no criminal proceedings against the presidential runner. While much of the damage may have already been done with Clinton showing a marginal lead in most polls vs an expected landslide several weeks ago, the removal of the criminal uncertainty now puts the focus back on the race which is entering the final straight. Both US markets and the US dollar, as well as global markets face some volatility as the election unfolds. Sentiment was to the downside for much of last week and stocks felt the brunt of this, in Europe the pan European Stoxx 600 had its biggest weekly decline since February, while in the US the S&P broke to the downside of some notable technical levels and with 9 consecutive days trading lower was facing the worst losing run since 1980. Overnight we have seen improvements in sentiment, Asian indices bounced with the Nikkei, Topix, and ASP/ASX200 up over 1%.
There are two basic schools of thoughts for markets over the coming days; A Clinton victory will be near term good for stocks and good for a stronger USD, while a Trump victory brings uncertainty and weaker stocks, and a weaker USD. As we have seen already this year, election polls carry little weight when the voters actually cast their ballots and either side has a chance of winning the US election. Most would argue that this election has been more of a side show than a running race and its clear to independent observers that both of the primary candidates have significant flaws, I cannot remember a presidential race where schoolyard tactics took the fore, and debates resembled a playschool shouting match. All this aside, the fact we are in this position shows the dissatisfaction with leadership across vast parts of America, and with that the chance of a change is very high. Even with the election out of the way, the US may face internal issues as a divided country looks to heal wounds ripped open by this fractious presidential race. For now the USD remains on the front foot but the election will set the path for the rest of the year.