Election Watch – Trump making gains
There are two types of polls in the Presidential election, according to Donald Trump; those that are right and show him in the lead, and those that are rigged. The former increased in value yesterday, with two polls showing that he had mounted a comeback in two of the most crucial swing states, New Hampshire and Florida. Trump was 9 points down a month ago in New Hampshire and is now in the lead in Florida as independent voters break for him as opposed to heading to Clinton.
Global risk assets slumped a little yesterday with dollar gaining on the Mexican peso and other high yielding currencies.
We ran our Clinton vs Trump webinar yesterday, looking at our expected outcomes from the vote as well as the likely reactions in currency markets. A recording of the webinar is available here and please feel free to get in touch with any questions that you may have.
Sterling taking hints from GDP
Sterling has recovered all of its Carney testimony easy pickings fall of Tuesday afternoon, aided by a weakening of the USD and some GBP buying ahead of this morning’s GDP report. Today’s release is only the preliminary figure of Q3 growth and therefore represents only about 35-45% of the total picture of the UK economy in July, August and September. The number is also more likely to be heavily weighted to those earlier months and so a clear picture this will not be.
Surveys are suggesting a number between 0.1% and 0.4% with consensus estimates looking for a figure of around 0.3%, but this is the muddiest figure we will have seen in a while, given the collapse in expectations in July and the rebound in August. Manufacturing may be optimistic but services are not sharing in that joy.
But only hints for the Bank of England
While the pound has become uncorrelated from the economic data that is being released, poor statistics will likely increase some pressure on the pound eventually – should the trends that they are looking to bear out become true and vice versa of course. We have to think that sterling will react slightly to the GDP number, if only to suggest further that the Bank of England needs to hold off on loosening policy at its meeting a week today.
During the August Quarterly Inflation Report the Bank surmised that should growth hit their expectation of 0.1% in Q3 then additional easing would be needed; if that doesn’t happen today then the Bank can re-holster that gun until February in all likelihood. February or Fear-bruary?
February will be a really interesting month we think; an inflation report coming and therefore the chance of a policy response, but taking place a month after the true inflation pressures on the UK economy are set to hit and a month before Theresa May’s self-imposed deadline of triggering Article 50. Election risk from the Dutch elections will also be hitting markets as well.
Today’s GDP release is at 09.30.
Elsewhere and the day ahead
Elsewhere, the central bank calendar is rather quiet, with the Fed and Bank of England gearing up for next week and the ECB on hold until December. Datawise, we are continuing to look for strong employment pressures in the US through the initial jobless claim release as well as an increase in durable goods orders that will likely round out another day of USD strength.