By Simon Eastman
Yesterday we saw the US dollar fall in value against most major currencies for a third day in a row, as the Mid Term elections got underway in the US.
Early polls suggest that the Republicans could make gains, meaning Democratic policies will be harder to push through, but there are many scenarios and various outcomes depending on the outcome, but most reports suggest Republican control of both houses would benefit Treasuries, whilst Democratic control of both would benefit the dollar.
Given the early polls are suggesting a Republican victory, which would mean it could be harder to get Democratic fiscal stimulus measures passed through congress, the dollar dropped off significantly over the days trade, losing almost 2 cent to the pound. Those with a US dollar requirement might be prudent to take advantage of the gain, as the pound is far from strong at present as markets await Jeremy Hunt’s budget report on the 17th November.
The euro started off well against the pound yesterday morning following better than forecast retail sales figures, which were expected to contract by 1.3 percent, but only did by 0.6 percent. With little else out though, and the result hardly anything to write home about, the gains were reversed by early afternoon as the pound clawed back to where it started off the trading day. All in all, a half cent movement over the day and probably a sign of things to come ahead of the budget report.
The pound rally was almost certainly helped by early reports that after months of wrangling over the Irish border, UK and EU parties seem to be making a breakthrough, with the EU starting to test the proposed system ahead of approval. This would bring months of fractious talks to an end and hopefully ease the movement of goods pressure felt since Brexit. We watch and wait to see if the proposition can get the green light as the Irish Prime Minister was quoted as saying “its doable by the year end”.
Today is a quiet day for market data with a lack of any key releases at all. We have a handful of central banker speeches, in the shape of the Feds Williams, ECBs Elderson and the BoEs Haskel. Then tonight the UK will brace themselves for any nuggets of wisdom from MP Matt Hancock, having spent his first full day in the Australian jungle. If you would rather act sooner with any upcoming currency exchanges then please contact one of the team today for some friendly guidance.