USD Surges Ahead of US Presidential Election

Markets await end of tight race for US Leadership

America heads to the polls with the eyes of the world to follow the results as soon as exit polls are available. The U.S. dollar and stock markets rallied after the FBI declared there were no criminal findings in the latest investigation into Clinton’s emails ending a week-long decline in the polls.

The path to the White House will end in victory for one of the candidates in what has become a new normal of American politics. High stakes and high drama have been a staple of the current election cycle. After the shock of Brexit the anxiety won’t dissipate until all votes are counted. The release of results all throughout the day as East coast exit polls are reported will impact markets. Safe havens such as gold have depreciated in the last 24 hours as risk appetite has returned. The Mexican peso (MXN) has recovered as the currency has acted as a proxy for a Trump defeat and emerging market exposure.

The market has shown its preference for a Clinton presidency as she rebuild her lead. Market behaviour should not differ from the tone set today if she is elected. Donald Trump remains an unknown factor which brings the shock Brexit outcome with a reminder of the power of the protest vote that is heavy in uncertainty. The winner of the election will face a divided country with the job of rebuilding trust a top priority at home and abroad.

The EUR/USD lost 0.838 percent in the last 24 hours. The single currency depreciated versus the U.S. dollar ahead of the presidential elections officially kick off on Tuesday, November 8. The news of the end of the latest FBI investigation into Secretary Clinton’s emails finding no grounds for criminal charges gave a boost to the American currency. Global markets bounced back as the biggest unknown is still the probable outcome of a Trump presidency. The Euro is trading at 1.1046 after touching daily lows of 1.1027.

The USD/MXN depreciated 1.669 percent in the last 24 hours. The peso has gained on an inverse correlation with Trump’s chances of reaching the White House. The currency is trading at 18.7034 and could fall further as exit polls get updated as the election data starts rolling in.

Gold is lower by 1.83 percent in the last day. The yellow metal is trading at 1281.23 close to the lows of the day. Risk appetite is back and safe havens such as gold have gone down as there is less anxiety in the market. The election is still a source of political risk and the outcome could still shock markets. Gold is being monitored by investors as a short term hedge, but Clinton rebuilding her lead and a highly anticipated December rate hike by the Fed are doing the metal no favours.

Oil is higher 1.948 percent in the last 24 hours. The price of West Texas is $44.75 after the Organization of the Petroleum Exporting Countries (OPEC) infighting came at the worst possible time for crude. The uncertainty about the U.S. elections could have offered some safe haven flow into commodities such as energy, but the already doubtful market on a crude supply glut was made even worse as the feeble OPEC production cut is unravelling. Oil has bounced back since mid day alongside other assets, but still to close to six week lows as the agreement in Algiers is looking like a non-starter for the general meeting in Vienna.

US markets have bounced 1.885 percent on a daily basis. As the election nears and with the FBI investigation no longer looming over the process the outcome favours Clinton with a slight but firm lead. The Trump camp has been busy trying to get the word out, but markets favour the stability of a Clinton presidency over the uncertainty of Trump.

Market events to watch this week:

Tuesday, November 8
5:30am GBP Manufacturing Production m/m
All Day USD Presidential Election
Wednesday, November 9
11:30am USD Crude Oil Inventories
4:00pm NZD Official Cash Rate
5:00pm NZD RBNZ Press Conference
Thursday, November 10
9:30am USD Unemployment Claims
Friday, November 11
11:00am USD Prelim UoM Consumer Sentiment
11:50am CAD BOC Gov Poloz Speaks

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

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.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza