Markets Seeing the Calm Before the Storm

We’re seeing the calm before the storm in financial markets on Tuesday as the build up to the US election gets underway prompting extreme caution among traders.

We saw plenty of risk appetite on Monday as traders unwound the previous week’s risk-off positions and once again positioned for a comfortable Clinton victory. The only issue now is that many of the polls don’t necessarily suggest it’s going to be as comfortable as the markets would have us believe which potentially leaves them very vulnerable to a surprise Trump victory. We don’t have to look back very far to see what that can do to the markets.

Source – Real Clear Politics Poll Average

The Trump hedge continues to be relatively well supported though, with Gold remaining above $1,280. In the event of a victory for the Republican candidate, we could see some substantial gains overnight with a move towards $1,350-$1,400 being plausible given the risk-off environment that would likely follow and the impact that such a result could have on Fed policy, with a rate hike in December looking far less likely.

Precious Metals Pre-Election

If Brexit was anything to go by we could see plenty of volatility in the markets as the results pour out, particularly if Trump takes one of the major swing states early in the night and sends the market into a frenzy. A number of currencies will be vulnerable to tonight’s vote, even beyond the US dollar and the peso, which appear most exposed. The safe havens, most notably the yen and the Swiss franc, could appreciate considerably in the event of a Trump victory which may force their central banks to respond quite rapidly.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

US Election Preview

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.