With the US election drawing closer and closer and with the latest polls indicating a race to tight to call, the debates are now seen by many as make or break for both candidates. With just over forty days to go before votes are cast, we had our first debate between Presidential hopefuls Donald Trump and Hilary Clinton. Markets tend to see Hilary as the more stable candidate, while few are sure what a Trump presidency will mean for US economic policies. This morning’s polls suggest Hillary drew first blood with markets using the Dollar/Mexican Peso as a good indicator for deciding the victor. The dollar sank 1.7 percent against the peso, while their other neighbor Canada also saw their currency rally on the back of the debate. However if we can take anything from the UK referendum earlier this year, it’s that confidence is a fragile concept in financial markets.
The other topic worth highlighting this morning and something that is very relevant to a lot of our clients is the ever more precarious position sterling appears to be finding itself in again. Over the last few trading days, sterling has found itself very close to significant levels against two of its major peer namely the US Dollar and euro. Versus the greenback, sterling hit lows early yesterday at 1.2919 getting very close to the post Brexit referendum low of 1.2869 that it has now bounced off twice so far since the 23rd June. In a similar fashion, sterling hit a low yesterday against the euro with EURGBP trading as high as .8712 (low for GBPEUR 1.1478) also close to its post Brexit high of .8725 (GBPEUR low of 1.1461). Should these significant levels be finally breached, it’s like we could be into a new range for sterling weakness. Whilst we have learned over the past few months, it will not always be one way traffic of just sterling selling, we would urge our clients to re-examine their sterling exposures and their current hedging position and policies. Something your contact at Clear Treasury will be able to assist with.