North American Summary and Highlights 4 November
Overview - The USD stabilized after slipping in Asia as the Democrats took control of Congress.
North American session
The USD stabilized following its Asian drop on the US midterm election results. New lows were made early on but a modest recovery followed the release of a stronger than expected 86k increase in October’s ADP employment index. A subsequent slightly lower than expected October ISM services index of 54.5 had no significant impact.
USD/JPY stabilized near 158.50. EUR/USD could not hold above 1.1250. Gains in EUR/GBP were also erased. AUD/USD held above .70 with AUD/CAD also firmer with USD/CAD stable.
European session
Main focal point the big US election results, with a decisive Democrat clean sweep comfortably gaining control of both the Senate and House. Initial reaction in Asia was a follow through spike down in tech stocks, but the Nasdaq found support ahead of the summer lows and back into strong positive, now up almost 1%, with volatility down and risk sentiment up.
Positives to be found in a convincing result beyond chaotic dispute and obstruction (Trump quoted saying he would absolutely accept them and Democrats did a good job). And from a gridlock that the market actually traditionally rather likes (less the better). Also at the margin, some relief on US bond pressure that had become a more material driver, even given the flip side that fiscal policy is less directly additive going forward. There’s also the hope perhaps of some containment of measures and stances that have been so globally impactful, although many remain to a large extent within the executive remit with varying abilities to obstruct.
FX likewise sees net pre-election position squeezes with the dollar off around ½ %, with the higher beta / most short counters leading (NZD +1%). EZ CPI up to 4% from 3.8%, in line with expectations. Final service PMI 51.7 from 51.9. UK service PMI 52.8 from 53.1.