The odds-makers are apparently already paying out bets placed on an Obama win, as it may be down to margins of victory in the House and the Senate results that prove the real points of interest tonight.
The USD crosses are trading nervously within yesterday’s ranges (outside of AUD/USD – see below) as we await the election results. As the odds seem to be tilting heavily in favour now of an Obama win, we’ll have to see whether the EUR/USD move lower holds through the other side of tonight’s results, but again, the USD picture is muddled at the moment, as the G-10 smalls have been ripping stronger, likely as the market considers an Obama victory a victory of sustained Fed activism and no real change in policy and therefore further recently to sell the money printers and buy the higher yielders.
So if we get a trade the rumour, cover-the-trade-on-the-fact kind of setup here, we might expect the move higher in G10 smalls to reverse course, though I would only expect that to happen if the market decides to dump risk after the results roll in as the unknown of the fiscal cliff looms.
AUD jumps on RBA
The RBA decision not to cut rates as the market expected and the statement had the market pulling its projections of RBA easing by some 10 bps or so after the decision. This saw AUD/USD back up through the 1.0400 level, though the real test is, of course, in the wake of the US election and the overall direction in risk appetite here.
Election Night is upon us!
My basic assumption:
Obama victory: More risk positive, USD negative as immediate reaction (if not already priced in by now), but any further reaction in this direction could quickly fade as uncertainty over fiscal cliff settles over markets, which would be more USD positive and risk negative.
Romney victory: The real surprise scenario as market not expecting this at all by this point.
Other: The only other thing that alters how the market reacts up front are the results of the Congressional elections.
Tonight’s Timeline
The first really important polls close at 0030 GMT tonight – but see below for a bit more colour on what to look for:
2300 GMT
First polls to close are in Indiana and Kentucky at 2300 GMT – but parts of these states are in the central time zone, so exit polls won’t be available until 0000 GMT (except for the leaked ones) when all of the polls are closed here. These two states are considered Romney sure wins.
0000 GMT
Virginia polls close: This is the first interesting real toss-up state to have polls close – watch for results of exit polls and for the tallies to roll in from this time.
0030 GMT
North Carolina and Ohio polls close: If exit polls show a strong Obama margin in Ohio and the vote count rolling in confirms that, an Obama win is almost a certainty. North Carolina is another key battleground state.
0100 GMT
Final Florida polls close (polls close at 00:00 GMT for Eastern Time portion of the state and 01:00 GMT for Central Time portion - but the assumption is that no exit polls will be available for the state until the entire state is finished voting). Romney must win Florida to have any chance at all in this election - the polls suggest a dead heat in this state. If results in both Ohio and Florida look strongly in favour of Obama, the election is almost over…
0200 GMT – Election already called?
If the margin of victory looks decisive in Ohio and Florida and either North Carolina or Virginia for Obama, the networks may have already called the election by this time. If not, the focus shifts to the likes of Wisconsin (closes at 0200 GMT) and Iowa and Nevada (both close at 0300 GMT).
Later….
Then we move onto other considerations like the size of the post-election Republican House majority and whether a huge upset can occur that puts the Republicans in charge of the Senate as well. The more things lean toward the Republicans in the House, the more the fiscal cliff negotiations might get ugly.
Dreaded scenario:
The night’s uncertainty could drag for a very long time if:
Romney wins Florida and the Obama margin of victory in Ohio is very slim. Ohio has cumbersome procedures related to counting votes from voters who show up with insufficient identification and overseas voters, etc.. These votes are not counted until 10 days after the election and then if the overall result is still extremely close, another 10 days is required for a full recount of all votes. So then we’re talking close to December 1 or a Bush/Gore 2000 Election replay. This is very low odds, but never say never.
Be very careful out there and enjoy the spectacle of US election night – It’s more fun for the US-based viewers to watch unfold with a salty snack and a beverage than it is for us poor European-based folk that must lose the better part of a night’s sleep over this…
Economic Calendar Highlights
The USD crosses are trading nervously within yesterday’s ranges (outside of AUD/USD – see below) as we await the election results. As the odds seem to be tilting heavily in favour now of an Obama win, we’ll have to see whether the EUR/USD move lower holds through the other side of tonight’s results, but again, the USD picture is muddled at the moment, as the G-10 smalls have been ripping stronger, likely as the market considers an Obama victory a victory of sustained Fed activism and no real change in policy and therefore further recently to sell the money printers and buy the higher yielders.
So if we get a trade the rumour, cover-the-trade-on-the-fact kind of setup here, we might expect the move higher in G10 smalls to reverse course, though I would only expect that to happen if the market decides to dump risk after the results roll in as the unknown of the fiscal cliff looms.
AUD jumps on RBA
The RBA decision not to cut rates as the market expected and the statement had the market pulling its projections of RBA easing by some 10 bps or so after the decision. This saw AUD/USD back up through the 1.0400 level, though the real test is, of course, in the wake of the US election and the overall direction in risk appetite here.
Election Night is upon us!
My basic assumption:
Obama victory: More risk positive, USD negative as immediate reaction (if not already priced in by now), but any further reaction in this direction could quickly fade as uncertainty over fiscal cliff settles over markets, which would be more USD positive and risk negative.
Romney victory: The real surprise scenario as market not expecting this at all by this point.
Other: The only other thing that alters how the market reacts up front are the results of the Congressional elections.
Tonight’s Timeline
The first really important polls close at 0030 GMT tonight – but see below for a bit more colour on what to look for:
2300 GMT
First polls to close are in Indiana and Kentucky at 2300 GMT – but parts of these states are in the central time zone, so exit polls won’t be available until 0000 GMT (except for the leaked ones) when all of the polls are closed here. These two states are considered Romney sure wins.
0000 GMT
Virginia polls close: This is the first interesting real toss-up state to have polls close – watch for results of exit polls and for the tallies to roll in from this time.
0030 GMT
North Carolina and Ohio polls close: If exit polls show a strong Obama margin in Ohio and the vote count rolling in confirms that, an Obama win is almost a certainty. North Carolina is another key battleground state.
0100 GMT
Final Florida polls close (polls close at 00:00 GMT for Eastern Time portion of the state and 01:00 GMT for Central Time portion - but the assumption is that no exit polls will be available for the state until the entire state is finished voting). Romney must win Florida to have any chance at all in this election - the polls suggest a dead heat in this state. If results in both Ohio and Florida look strongly in favour of Obama, the election is almost over…
0200 GMT – Election already called?
If the margin of victory looks decisive in Ohio and Florida and either North Carolina or Virginia for Obama, the networks may have already called the election by this time. If not, the focus shifts to the likes of Wisconsin (closes at 0200 GMT) and Iowa and Nevada (both close at 0300 GMT).
Later….
Then we move onto other considerations like the size of the post-election Republican House majority and whether a huge upset can occur that puts the Republicans in charge of the Senate as well. The more things lean toward the Republicans in the House, the more the fiscal cliff negotiations might get ugly.
Dreaded scenario:
The night’s uncertainty could drag for a very long time if:
Romney wins Florida and the Obama margin of victory in Ohio is very slim. Ohio has cumbersome procedures related to counting votes from voters who show up with insufficient identification and overseas voters, etc.. These votes are not counted until 10 days after the election and then if the overall result is still extremely close, another 10 days is required for a full recount of all votes. So then we’re talking close to December 1 or a Bush/Gore 2000 Election replay. This is very low odds, but never say never.
Be very careful out there and enjoy the spectacle of US election night – It’s more fun for the US-based viewers to watch unfold with a salty snack and a beverage than it is for us poor European-based folk that must lose the better part of a night’s sleep over this…
Economic Calendar Highlights
- UK October BRC Sales Like-for-Like out at -0.1% YoY vs. +1.3% expected and +1.5% in September
- Australia Q3 House Price Index out at +0.3% QoQ and +0.3% YoY vs. +1.0%/+0.8% expected, respectively and vs. -1.9% YoY in Q2
- Australia RBA left Cash Target unchanged at 3.25% vs. 25-bp cut to 3.00% expected
- UK October Halifax house Prices out at -0.7% MoM and -0.2% YoY vs. +0.3%/+1.1% expected, respectively and vs. -1.2% YoY in September
- Spain October Services PMI out at 41.2 vs. 40.2 in September
- Eurozone October Final Services PMI out at 46.0 vs. original 46.2 estimate
- UK September Manufacturing Production out at +0.1% MoM and -1.0% YoY vs. +0.4%/-0.8% expected, respectively and vs. -1.2% YoY in August
- Germany September Factory Orders out at -3.3% MoM and -4.7% YoY vs. -0.4%/-1.5% expected, respectively and vs. -4.6% YoY in August
- Canada October Ivey PMI out at 58.3 vs. 58.2 expected and 60.4 in September
- US Weekly API Crude Oil and Product Inventories (2130)
- Australia October AiG Performance of Construction Index (2230)
- Sweden Riksbank’s Svensson to Speak (2300)
- UK October BRC Shop Price Index (0001)