Key Points:

Biden on target to win election, Trump starts legal action

US stocks rally strongly with Nasdaq 3.85% up on the day

USD weakens with US yields, commodity currencies outperform

The so called expected Blue Wave failed to materialise in yesterday’s US election sending markets on a yo-yo reaction as certain states swung between a Trump or Biden majority. With most of the votes in Trump went to declare a win early, part of his expected tactic to take a tight contest to the Supreme Court if he loses, which as at the time of writing looks a strong possibility. The USD selling and stock rallies stopped and reversed as Trump held Florida taking some of the steam out of Biden’s rally, but then reversed back and forth several times. With Trump launching legal action and demanding recounts its likely we will have to wait until the end of the week at least to declare a winner. Maybe weeks. Currently it looks like the Senate will remain with GOP and the Democrats will keep the house, which means more of a standoff on policy decisions regardless of who becomes President. The USD has weakened and despite a stellar rally with the Nasdaq up 4.5% at one point, we’ve seen some of the excitement tempered and indices back off their highs into the close. DJ up 1.35%, S&P500 2.15% and Nasdaq up 3.85%. Looking at some of the ranges in currencies shows how volatile it was but less so than in 2016 when Trump surprised markets with his win. GBP has been the worst performer in comparison as Brexit comments and lockdown fears have crept back in. EUR/GBP has moved from 0.8944 to 9033 reflecting the differing in price between EUR/USD and GBP/USD on the day. The commodity currencies naturally rallied well with stocks and are the best performers vs the greenback currently but with plenty of uncertainty ahead we could see some further volatility in currencies over the next few days. The ADP print showed a poor number but the disparity with the NFP data in recent months has been wide and markets ignored it. On the data front Australian retail sales were better than expected and PMI’s across the US and Europe were mixed but again ignored with the election the main event. In Asia today we will get a look at Australian trade data before the European session will show us what the BoE are thinking with the rate decision and monetary policy report. Brexit talks continue so price around GBP is expected to be high. Later today in the US session we see the weekly jobless claims data and FOMC which again should be a sideshow for both but markets will be eager to hear from Powell.

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