A truly historic day

US election too close to predict

This has been a long but truly historic day that won’t be forgotten any time soon. And there’s still almost certainly more action to come.

The whipsawing we’ve seen in markets has been fascinating from the moment that Trump declared victory in the early hours, just before the European open. Europe is poised to end strongly, as the odds on a Biden victory increase and investors seemingly begin to price out a harmful legal challenge that will generate enormous uncertainty at the worst possible time.

It may be a little premature to write off a Trump challenge given the unbelievable events of today but investors are looking as comfortable as they have at any point. It’s interesting that, despite the threat of Supreme Court challenges, at no point have we seen any real panic in the markets. There was some downside but it wasn’t severe. Investors have very much taken today in their stride.

Perhaps it’s a sign of the times that extraordinary events like today aren’t as shocking as they previously would and should be. It’s been an extraordinary four years and if this is the end for Trump, it’s probably a fitting way for it to come to a close. Although something tells me it’s far from over yet.

The counts and maybe even recounts are poised to drag on until at least tomorrow and potentially even longer so the uncertainty isn’t going to disappear entirely but there is at least a possibility that it is wrapped up this week. That would be ideal for the markets given the sheer amount of risks it’s dealing with right now. And the Senate staying red may not be the end of the world either. Less fiscal stimulus isn’t ideal but some is inevitable and it may make it difficult to pass some of Biden’s market unfriendly policies.

Oil buoyed by inventory draw and election results

Oil prices are making decent gains once again today, supported by recent OPEC+ speculation and today’s large reduction in inventories, reported by EIA. While the latter clearly gave crude a bump today, it’s the former that’s driven the bulk of the rebound in recent days and it’s time for the group to deliver if they want to avoid a repeat of last week, or worse.

There has been a clear link between the movements in oil prices and equities today so clearly crude is reacting to the election just like everything else. Perhaps the dollar is one of the primary drivers on this front, with the greenback favoured in periods of risk aversion.

Gold holding off for election result

It’s certainly been important factor in the gold moves today, with the yellow hanging around USD1,900 despite the volatility throughout the session. Gold has not broken out of its ranges though, with USD1,920 capping gains to the upside and USD1,880 to the downside. As more results come out, that may change.

A challenge could trigger risk aversion and weigh on gold prices while an acceptance from the eventual loser – as unlikely as it seems at this point – may be enough to see it through USD1,930. Perhaps we’re getting ahead of ourselves. There may be a little more life in this election, yet.

BoE brings forward monetary policy decision to 7am

One final note is the Bank of England’s decision to bring forward its monetary policy decision tomorrow to 7am from midday previously. This is apparently due to the Chancellor’s statement in the afternoon but will naturally trigger speculation that the central bank will add to its stimulus offering.

It was already expected to do so to the tune of around GBP100 billion, either tomorrow or next month. Either would be understandable with new projections accompanying tomorrow’s decision and December having the added benefit of a Brexit deal having either been reached or not. It’s probably much of a muchness really, being pretty much baked in at this point. Negative rates could spring a surprise but I doubt they’ll go down this route at this point.

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/

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

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam