Obama Stays at the Helm

The re-election of the incumbent US President doused fears of change to existing US monetary policy, triggering a rally in high yield currencies this morning. However, with Republicans continuing to hold control of the House of Representatives, the newly elected President has his work cut out with the looming “fiscal cliff” negotiations. Traders are now expected to shift focus to Greece, wherein Parliament will vote on fresh austerity measures for unlocking the next aid tranche from lenders. Meanwhile, the NIESR reported a slowdown in UK GDP growth, fuelling prospects of weaker growth in the fourth quarter.

Pound Sterling – UK Markets

The Pound breached the 1.60 mark against the US Dollar this morning, as the re-election of the incumbent US President, Barack Obama, signified continuation of the ultra easy monetary policy adopted by the Fed. However, burgeoning risk appetite among traders has steadily weakened the Pound against the Euro. In yesterday’s trading session Sterling managed to hold its ground, despite the nation’s industrial output registering its biggest monthly drop since August 2009. With the highly anticipated event off traders’ radar, markets are expected to set their focus on tomorrow’s BoE monetary policy meeting for further direction to Sterling against the majors. Meanwhile the NIESR, in its monthly projection, indicated that UK GDP growth slowed to 0.5% for the three months ended October, further highlighting the weakness shown by the latest PMI readings. Meanwhile, UK shop inflation climbed for October following a rise in food prices. With a light domestic calendar today, the Greek vote on the latest austerity measures could provide further direction to Sterling.

US Dollar – US Markets

With voters once again backing Barack Obama, the outcome of the US Presidential elections suggests that there would be no dramatic shift in US economic policy. However, there still remains an underlying threat of policymakers failing to address issues related to the “fiscal cliff”, given the fractured mandate, with Republicans holding control of the House of Representatives. The US Dollar weakened against its major peers in today’s trading session. On the macro front, ISM revealed that the New York business activity index slipped to a 12 month low, even before Hurricane Sandy caused havoc, and was starkly in contrast to earlier data showing a marginal improvement in the region’s manufacturing activity. With consumer credit being the only major economic indicator scheduled today, the greenback is expected to closely track the outcome of the Greek austerity vote for further direction.

Euro – European Markets

The Presidential election in the US sprung no major setback and has provided sufficient room to the Fed to pursue its ultra loose monetary policy, following the victory of Barack Obama. However, traders have now turned their attention to the austerity vote in the Greek Parliament, which is expected to be passed by a narrow majority. The proposed budget and reforms must be passed by Greece for it to receive its next aid tranche. Following the dismal set of PMI readings, German factory orders registered a greater than expected drop for September. Additionally, Spain continues to feel the pain, as the nation’s industrial production slumped for September. Meanwhile, with the debt crisis posing a severe threat to core Eurozone nations, the French President bowed to growing pressure by announcing fresh business tax cuts. Apart from the event in Greece, markets are expected to pay moderate attention to Eurozone retail sales and German industrial production data due later today. Additionally, tomorrow’s ECB press conference, following the interest rate decision, is likely to be dissected for further cues.

Other Currencies – Highlights

The Swiss Franc advanced against the US Dollar in today’s session, tracking gains in the Euro, following a spurt in market risk appetite after the incumbent US President was re-elected. Moreover, data released earlier today revealed that deflationary threats in the Swiss economy appear to be abating, with a smaller decline in the annual consumer price index for October. With no major domestic macro data scheduled today, the outcome of the Greek Parliament vote is expected to influence the Swiss Franc. Additionally, tomorrow’s Swiss unemployment data and cues from China’s ruling Communist party meeting is expected to set the near term trend for the Swiss Franc against the majors.