By Nick Harrison
With very little market data released at the beginning of this week, investors have turned their eyes to the political situation in the US. As we have recently found out, the US Vice-President Kamala Harris has established herself as the Democrat’s leader to take on Donald Trump in the election which happens on November 5th.
Whilst having previously struggled to gain political popularity, Harris has reinvigorated the support for the Democratic party which, in turn, has seen record donations delivered this week. Yesterday also saw a poll show her pull the gap to just 3 points behind Trump. So it’s game on in the US and the world will no doubt see many debates and many swings in sentiment as the election race plays out. But why does this all matter to the FX market? Well, political uncertainty can take a lot of risk out of the market which, in turn, strengthens the USD as it is seen as a safe haven currency. This can therefore weaken the more riskier currencies such as the Pound & Euro, so we may well see some market volatility as we approach November.
Today & Tomorrow
Market data kicks in today and tomorrow as we see some important releases across the UK, US & Eurozone. Already this morning, we have seen Manufacturing and Services data released in Germany and France. Anything above 50 indicates an expansion in that industry and it is a survey of about 750 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries, and inventories. It’s a leading indicator of economic health – businesses react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company’s view of the economy.
So, this morning we have seen a mixed release of results, with the French posting worse than expected manufacturing data, but better than expected services data. The German releases showed lower than forecast data on both sectors and so as a result we have seen the Pound strengthen again to near the highest level we have seen for 2 years.
Later this morning, it’s the turn of the UK to release this data and the US follow this afternoon. Look out for currency movements as investors digest these important releases.
Also, this afternoon, we see the release of the Canadian monetary report and subsequent interest rate decision. They are expected to cut their rate by 25 basis points, so we could see a bit of volatility for CAD buyers and sellers.
Tomorrow afternoon is a potentially big day as far as US data is concerned. Firstly, the preliminary GDP figure is released. This is the broadest measure of economic activity and the primary gauge of the economy’s health, so we could see some market reaction off the back of this. Also, the US Unemployment Claims figure is released at the same time.
Unemployment is a major consideration for those steering the country’s monetary policy, so again we may see some market movement after these releases. The rest of the week sees the G20 meetings happening on Thursday & Friday and the US Core PCE Price Index wrap up the week on Friday.
Plenty to digest then in the second half of the week then, so do make sure you reach out to our team to help understand how a constantly moving market can work for or against your currency exposure.
Data releases this week
Today
UK Flash Manufacturing & Services Data 9.30am
Canadian Interest Rate Decision 2.45pm
US Manufacturing & Services Data 2.45pm
Tomorrow
US GDP & Unemployment Claims 1.30pm
Friday
Core PCE Price Index 1.30pm