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Everyone’s a winner

Orchestrated tension

Biden’s blue wave has not had the momentum that was expected as the election shows to be much closer than many had anticipated. As was the case four years ago, opinion pollsters forecasting a win for the Democratic presidential candidate turned out to have made a woeful miscalculation. With substantial numbers of postal votes yet to be opened, let alone counted, it is likely to be at least another 24 hours before a winner can be identified. And if that winner were to be Joe Biden, the Trump organisation could be expected to send in the lawyers.

So is this orchestrated tension a risk-off indicator, positive for the safe-haven currencies including the US dollar? Is it a negative for the dollar, on the basis that it makes the provision of long-awaited economic stimulus more difficult? Judging by the confused currency action as the electoral impasse became clear this morning, investors are not entirely sure. On a 6am – 6am basis, the USD was unchanged on the day against the EUR, having lost and regained one cent.

The acrimony of the election campaign has continued after the votes, as the President claimed on TV that he had already won the election and would be pursuing legal action. He called for the election to be stopped, labelling it a “major fraud” and an “embarrassment”. Even that bombshell elicited no coherent response from investors, however.


Random moves

Sterling had a usefully positive day, strengthening by an average of 0.2%. Its only loss was three quarters of an Australian cent and its biggest gain was one Japanese yen. None of those outcomes made a great deal of sense.

With no UK ecostats on Tuesday’s timetable, investors were left with tomorrow’s lockdown and January’s potential no-deal Brexit to consider, neither of which fills them with delight. The Brexit negotiators are still struggling with fish and playing fields, and are taking a break this week, yet they still expect an agreement within a fortnight. The Institute for Government is less optimistic about the future. It said in a report that with Brexit and Covid-19 combined, “local authorities and businesses may well be overwhelmed”.

Ecostats from elsewhere were hardly more numerous. US factory orders increased by 1.1% in September. NZ milk prices fell 2% in a fortnight. Overnight, New Zealand reported that unemployment increased from 4% to 5.3% in the third quarter, as expected. Australian retail sales fell 1.1% in September, rather less than forecast.


Services PMIs

Australia was first out with its services sector purchasing managers’ index. It improved by a further three points in October to 53.7 from August’s sub-50 dip. China followed with a two-point improvement to 56.8.

The services PMIs from Europe this morning are not expected to be as healthy as Monday’s manufacturing readings. Germany, France and pan-Euroland are all forecast to be below the breakeven line at 50. Britain is pencilled in for an unchanged 52.3 and the equivalent US number is expected to be 56. At some point today, the European Commission is due to publish its latest economic forecasts.

In the States, it is unlikely that the election result will be resolved today. The interest there will centre on the debate which surrounds it, and how investors translate the uncertainty into currency values. Watch and wait.

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