A Presidential Debate that was anything but presidential ......

Monday 10th October 2016

  

A Presidential Debate that was anything but presidential ......

ref:-  "Mexican Peso Trades at One-Month High After Presidential Debate", Bloomberg Markets

It's not our job to offer commentary on exclusively political events ..... which is fortunate in that it means that we don't have to give our opinion on whether or not the level of last night's debate hit a new low, or whether either of the candidates seems to be becoming more grotesque by the day. We should be on top of things however when political developments impinge on financial markets, and the question of who gets elected to the US Presidency would definitely qualify.

So who won last night's debate and improved his or her chances of winning the election? Regulars will know that the surest guide to the markets' view of who fared well is to be found in the price of the Mexican Peso, the proxy for gauging Mr Trump's fortunes and now for many people the electoral swingometer of choice. The peso jumped as much as 2% in early exchanges although at 19.00  to the dollar it's given back a little bit of that since. All things considered it seems as though the foreign exchange markets reflect the wider consensus pretty accurately: another points win for Ms Clinton, but not a conclusive one. Disappointingly for the Democrats, her inability to deliver a knock-out punch leaves the contest still alive, and unless fellow Republicans find both the will and the way to pull the rug from under him nobody should write off the beleaguered Mr Trump  --  not in this era of political bombshells.

As it happens, the US Dollar was a little bit on the defensive anyway after Friday's US employment data for September. The three highest-profile elements of the release were all marginally softer than consensus estimate: Non-farm payrolls +156,000 (expected +172,000), Unemployment rate 5.0% (exp. 4.9%), MoM Average Hourly Earnings +0.2% (exp. +0.3%).

The implication drawn from these slightly weaker numbers is obviously that they make a rate hike by the end of the year a little less likely -- hence the Dollar being marked down a touch. But again, this morning's market movements with USD recovering lost ground have reflected the wider perspective on the data ..... that in truth, you can read what you want into them. On the one hand they're a bit weaker than forecast yes, but on the other it's still a respectable increase in payrolls. Anyway, there are still two more monthly employment releases before the December decision and probability of a hike in 2016 is still above 60% according to Fed Funds futures markets. Effectively, the market is telling us that in the absence of a release that was either stronger or weaker than expected by a wide margin, it's simply a case of "as you were .....".

Mr Trump's supporters will no doubt wish the same thing with regard to his chances of the presidency ..... even if some might argue that they were looking tarnished enough before the debate. Still, as he keeps telling us, he likes a challenge. Peso traders will be paying close attention .....