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18th of November 2018


US Midterm Elections and Brexit Continue to Influence Currency Market Sentiment

OVERVIEWThe Currency market is treading water today as investors avoid making aggressive bets in advance of bellwether events.   The Euro has support from robust job creation numbers Sterling saw slight gains today on hopes PM May is sharing positive Brexit deal news with her Parliamentary colleagues  HIGHLIGHT

Americans flock to the voting boxes today, and currency investors watch to see if a blue or red wave will wash over the US political landscape. The quality of opinion polls is always debatable among all the noises hitting the market. However, we do expect volatility to kick into higher gears in the aftermath of the results.


The world watches and waits for results of US Midterm Elections today. Polls suggest that the Democratic party should take control of the House of Representatives and Republicans should continue to dominate the Senate. Polls are polls, yet the die will be cast in mere hours. The election results will set the tone going forward as to Greenback valuation and political sentiment. 


In the UK, speculation around a rumoured UK-EU exit plan continues to impact the Sterling. The British Prime Minister gathered her troops to discuss next steps. So far, the market has seen little progress from both parties.  GBP/USD is up 0.25% since yesterday, driven mainly by positive sentiment that a breakthrough is closer than expected. The UK and EU are running out of time to put an orderly exit plan in place. 


EUR/USD continues to oscillate around the 1.14 levels. Eurozone PMIs provided some trading impetus during the European hours and focus has now turned to the outcome of the US mid-term elections. Final Germany Services PMI Index was at 54.7. A three-month low while the headline Output Index dropped to a five-month low. However, investor sentiment was buoyed by the pace of expansion which was robust with job creation increasing at its quickest rates recorded over the past 11 years.


The Canadian Loonie is little changed in trading against the Greenback for the third session in a row. Lack of relevant data and a cautious stance from market participants are keeping the pair in a tight trading range.  We expect liquidity to remain low as Americans go to the polls.


AUD/USD is holding near the session’s high after the Reserve Bank of Australia revised its forecasts for economic growth “a little up.” Earlier today, the Board decided to maintain the cash rate at 1.50%, which is unchanged at 1.50 percent. There is an expectation that the current monetary policy will continue to support the Australian economy and gradually help to reduce unemployment.


Dollar-Yen remains in wait-and-see mode. The pair is trading in the 113 regions. We expect event risks out of the US (election and a Fed meeting this week) to provide strong trading impetus over the next couple of sessions. 13.40-45 region. The Japanese Yen is vulnerable to divergence in interest rates as the US Fed is expected to continue with its gradual move towards neutral-plus status.

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