US Election Heats Up

Better than expected US jobs data on Friday validated hopes that the world's biggest economy is on the path to recovery and saw investors shun high yield currencies. Traders seem to be on tenterhooks today as the battle for the US Presidency reaches a climax, with the latest poll survey suggesting a close contest between the two candidates. Back at home, markets continue to scale back expectations of more easing measures at the BoE’s policy meeting on Thursday, as the dominant services sector portrayed signs of resilience, despite turmoil across the globe. In Europe, the Greek bailout dilemma continues and is likely to provide fodder to traders during the week.

Pound Sterling – UK Markets

The Pound is trading marginally higher against the Euro in today’s session, as the latest PMI data revealed that the services sector remained somewhat insulated from Eurozone debt troubles and continued to expand for October, albeit at a slower pace. The emergence from double dip recession appears to have changed sentiment among British employers, as the Lloyds employment confidence barometer climbed sharply for October. With the UK economy showing signs of a turnaround, traders have drastically scaled down their hopes of fresh liquidity infusion by the BoE in its monetary policy meeting later this week. Traders are also expected to pay close attention to industrial production figures and BRC’s shop price data for further evidence of the strength of the UK economic recovery. Following the major economic release from the UK today, markets are expected to focus on the services sector data from the US and developments ahead of tomorrow’s US Presidential election for further direction to risk sentiment.

US Dollar – US Markets

The US Dollar continued to cling on to its gains witnessed during Friday’s session, as the improving state of the labour market validated widespread belief that the US economy continued to gain traction. Data released on Friday indicated that the US added more than expected non-farm payrolls for October. Moreover, the greenback also benefitted from safe haven buying in today’s session, as traders trod cautiously ahead of the US Presidential election tomorrow. The latest poll survey suggests that the battle between the two candidates is expected to be close. In an attempt to address the issues surrounding the global economy, G20 leaders urged the US to act decisively in order to stave off concerns surrounding the fiscal cliff. However, latest data from the Eurozone revealed that the region’s investor confidence improved for November. Apart from developments in the political arena, traders are also expected to keep an eye on the ISM’s non manufacturing PMI scheduled later today to gauge the impact of the Fed’s fresh liquidity infusion into the US economy.

Euro – European Markets

The Euro declined against the US Dollar in Friday’s trading session, as risk sentiment among market participants took a hit over concerns that Greece would struggle to secure further aid. The Greek Prime Minister, Antonis Samaras, will table the austerity package before Parliament today. Additionally, robust US non-farm payrolls data also weighed on the performance of the Euro. In today’s trading session investors continue to shun the Euro against the majors, as looming uncertainty surrounding the outcome of the Presidential election in the US continues to curb risk sentiment. Meanwhile, the Eurozone Sentix investor confidence index nudged higher for November, revealing a significant improvement in sentiment since the ECB announced its new Outright Monetary Transactions programme in August. Markets are expected to keep a close eye on Eurozone retail sales data and German industrial production and trade balance figures during the week for more cues on the economic front. The ECB’s monetary policy meeting is also expected to garner modest market attention, given a slim chance of an interest rate cut.

Other Currencies – Highlights

The Canadian Dollar is trading higher against the Pound and the Euro this morning, as traders turned optimistic following data released on Friday revealing that US hiring grew at a stronger than expected pace for October, thereby boosting prospects for the Canadian economy. However, weak crude oil prices have kept a tight lid on the upside performance of the Canadian Dollar against the majors. Meanwhile, markets await building permits data later today for further cues from the domestic front. Traders are also expected to keep a watch on tomorrow’s Ivey PMI reading and housing starts and trade balance figures later this week, for fresh insights into the Canadian economy. Given the close link between the Canadian Dollar and trends in the US, the Loonie is expected to keep a close track of developments ahead of the US Presidential election and non-manufacturing data from the US for further direction during the day.