Millions of Americans head to the polls today in what is widely projected to be the closest presidential election in modern history. If you believe the majority of outlets, all seven swing states are locked in a statistical tie, meaning it could take days or even weeks to declare a winner.
Currency markets are feeling the brunt of that uncertainty. The US dollar dropped by 0.5% against its European rivals on Monday before perking up slightly in the afternoon session. GBP/EUR lost a further third of a per cent as sterling faces up to its own major event on Thursday.
The stakes are slightly lower for the pound, although interest rate decisions bring their own peril. Most economists think the Bank of England will cut borrowing costs by 0.25% to 4.75% on Thursday afternoon. That decision has been thrown into question by the scale of spending in Labour’s autumn budget.
For now, markets will be on tenterhooks as they look to divine a trend from early US polling numbers. Many caffeine-fuelled observers may find their efforts to catch the outcome in the wee hours frustrated by the tightness of the race, as well as the unwillingness of each state to declare a victor amid the threat of legal challenges from Donald Trump’s team.
It’s not just the US dollar that could be affected by the outcome. The pound and the euro are also likely to be highly sensitive to the result, particularly should the count be turned over to the courts for a protracted examination.
To protect your next transaction (as well as to be able to retire at a more sociable hour), we strongly recommend you secure a fixed rate by locking in a forward contract before the polls slam shut this evening. To do so, call your account manager on 020 7898 0541.
US markets will at least have the distraction of October’s ISM services PMI to look over tomorrow. While somewhat lost amid the noise of political campaigning, the Federal Reserve must make its own rate decision on Thursday and each scrap of evidence could prove crucial in dictating its decision.
