Election time

Markets

Monday’s garden variety price action was par for the course as traders were most unwilling to extend risk with the US Midterms and the upcoming FOMC meeting in focus. As for the Midterms, consensus suggests that only a surprise sweep from either party will elicit much reaction in FX land. The Midterms have indeed fostered a lot of interest, but let’s see if the polls will get it right this time around. However, flying under the radar is that these midterm elections carry a sizable legal risk for the GOP which could dent investor confidence as we will likely hear much more from Robert Mueller sooner rather than later.

As for the Fed, they will be hard-pressed given the strong labour markets to walk back any of the markets perceived hawkishness.

As for Presidents Xi speech, I don’t think we need to look much further than his comments directed at Trump policy as ” the law of the jungle” to suggest the setup for the meetings later this month remains tenuous and on shaky ground.  But again Presidents latest rally message indicates the US will make a deal with China; TRUMP SAYS BELIEVES WILL MAKE DEAL WITH CHINA’S PRESIDENT XI  ( Bloomberg). But the markets can’t help but think this messaging is little more than campaign fuel and the proof will be in the G-20  pudding.

Asia Markets

The Malaysian Ringgit

Post-budget, its expected Malaysia, will receive a negative outlook if not a complete rating downgrade. While credit rating downgrades are not the death knell for a currency, but it will have significant short-term impacts, and that threat alone will keep the MYR trading defensively in the weeks ahead.

But with the deficit target at the higher end of market expectations, the MYR could weaken at a faster pace than expected and we could see 4.20 + by year-end.

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.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes