Trump alert

Risk-off

Once upon a time not even the Mexicans or the Japanese paid much attention to the peso/yen exchange rate. Recently, however, the performance of the peso against the yen has been inversely proportional to the likelihood of President Trump occupying the White House next year.

On Tuesday that possibility looked closer, as a Washington Post opinion poll gave Donald Trump a 46-45 lead over Hillary Clinton, and the peso went down by -3%. As anyone who followed Britain's EU referendum will recall, opinion polls are not always a reliable guide to election outcomes. However, the one yesterday could not be overlooked by investors and they lightened their holdings of "risky" assets in favour of gold and the safe-haven Swiss franc, euro and yen.

With Brexit hanging over it the pound cannot be considered a safe haven right now, just as the uncertainty implicit in a Trump presidency makes investors wary of the US dollar. Both currencies were in the back half of the field on Tuesday, the dollar a fifth of a cent ahead of sterling. Switzerland's franc was the clear leader, rising 1.4%, while the euro and the yen made gains of 0.8%. Anti-risk sentiment relegated the South African rand to the back of the field with a -1.2% loss.

PMIs mostly alright

The only disappointment among yesterday's manufacturing sector purchasing managers' indices was Britain's 54.3. It was not far adrift from the predicted 54.5 but it missed target and investors do not exactly have a forgiving attitude to the pound these days.

Switzerland's 54.7 was the best of the numbers released during the London session and the two US measures came in at 53.4 and 51.9. A religious holiday in continental Europe meant the postponement of the German and Euroland figures until today. Canada's 51.1 PMI reading was less important than the news that the Canadian economy expanded by 0.2% in August. It now looks clear that the slowdown in Q2 was an anomaly.

New Zealand's dollar got some help from the third quarter employment data which came out overnight. Unemployment fell to 4.9% from a downwardly-revised 5.0%, the number of people in work went up by 1.4% and participation increased to 70.1%. They were all good numbers and the Kiwi strengthened by 0.8%, keeping pace with the safe-haven yen and euro.

Fed says no

Wherever investors think US interest rates might go this year, few of them expect any change to result from today's meeting of the Federal Open Market Committee. They will, however, be hoping for guidance as to what - if anything - the FOMC might have in mind for next month's meeting.

With the US elections less than a week away it is inconceivable that the Fed will raise rates today. For the same reason it is unlikely to give a clear steer on next month's decision. 

The two numbers to watch are the UK construction PMI and the ADP employment change. Australia's trade figures come out tonight.