CAD
While loonie traders, like everyone else, will be keeping a close eye on the outcome of the US elections, they also have the Bank of Canada’s summary of deliberations to contend with today. Released at 18:30 GMT, markets will be looking for any indication as to whether October’s 50bp rate cut was a one-off, or if this marks the beginning of an accelerated easing trend. We are inclined to think the latter given weak underlying inflation pressures and soft growth outturns over recent months. If we are right, this could see USDCAD making gains ahead of the main event, which is likely to play out for FX markets in the early hours of the morning.
USD
We often use the phrase “coin toss” to describe an event where the outcome is close to 50-50. In fact, due to the raised engraving on many coins, the chance of flipping heads is actually slightly more likely than tails. We mention this because overnight, US polling guru Nate Silver in his final presidential election simulation, found that Harris won 50.015% of trials, with Trump claiming victory in 49.985% of runs. In other words, today’s election is closer than a coin toss, highlighting the uncertainty surrounding the outcome. That fact is likely to keep market price action light today, with traders awaiting results in the early hours of tomorrow morning. We have no reason to think that the bias of recent weeks – a stronger dollar on a Trump win, weaker dollar with a Harris victory – should not hold overnight. But at this juncture, we have little basis to favour either outcome, aside from saying that the dollar should break one way or the other, and that volatility should be pronounced. Buckle up for a bumpy ride.
EUR
Like most currencies, it should be a quiet day for the euro ahead of US election results. We suspect traders will be keeping their powder dry ahead of the election outcome. That said, muted price action is also to be expected based on the light data calendar. In terms of data, French industrial production data undershot expectations earlier this morning. Having been expected to contract -0.6% MoM in September, it fell by -0.9%. Not that the euro has appeared to notice, having registered only a marginal uptick post-release. With this in mind, we suspect that traders are also likely to look through Spanish jobs data too, the only other data release of note from the eurozone today.
GBP
Similar to the eurozone, the UK’s data calendar is also limited today. BRC sales, official reserves, and final PMI readings are all on the docket, but none are likely to trouble the pound. Instead, all eyes are likely to spend the day firmly trained on the other side of the Atlantic. Markets are waiting to find out the next occupant of the White House, before turning attention to the BoE’s rate decision on Thursday.
This content was originally published by our partners at Monex Canada.