Global markets had a relatively quiet day yesterday as market participants await the results of the US mid term elections. Volumes were down across the board as the markets prepare for what could be a very influential result in terms investor sentiment for the next 24 months. The US indices finished the day nicely in the black in line with the Asian markets, although the European bourses had a tougher day. The dollar continued to drift off over the session against the majors and continued to lose more ground in the EM’s.
The Kiwi jumped over 70 pips after much stronger than expected employment data this morning with the quarterly number up 1.1% against an expected 0.5% and the unemployment rate dropping to 3.9% from 4.4%. This data should keep the currency bid over the next few sessions especially on the crosses where there will be less affect from the US election results and will go a long way to removing the possibility of a RNBZ rate cut over the medium term.
The impact that President Trump and his administration has had on global markets since coming to power is considerable and any change in their ability to implement policy could have a significant impact on market direction and that’s why these midterms are being monitored so closely. The US stock markets had been driving to new highs on the back of extensive tax cuts and infrastructure spending but investor caution over the high profile protectionist trade policy led to a dramatic downturn in October and market participants are now wary of what the next steps will be from the administration after these elections. The smart money is on the democrats taking control of the House of Representatives and the republicans maintaining the Senate control, but if we do get a surprise in the results then expect some sharp moves across the markets.
Looking ahead to today’s trading and it is really all about the mid term election results as there is very little in the way of fundamental data releases due. The kiwi will once again come into focus during the Asian session when we get the latest Inflation expectation data around lunchtime but after that it’s fairly light on the ground. There’s no tier 1 data due for the rest of the days trading sessions but expect volatility and volumes to pick up as we move through the day and the political set up in the US becomes clearer and the market gets to grip with the outcome.