Duck and Cover

Usually sleepy Monday morning it is not out there, with risk assets especially in the FX world showings unusual signs of jumpiness ahead of tomorrow’s US election. The Greenback is putting in a strong performance over the last few sessions as most investors elect to ride out the elections in a safe haven currency. The Euro is trading at a one month low vs the dollar and the Aussie dollar which is often thought of as a risk metric is extremely jumpy in the early morning London trade but with a bias for the downside.

It will be a busy week for economic data and decisions this week as not only is there the US  elections but also a UK and European rate decision (both are expected to stay on hold @ .50% and .75% respectively) and the RBA are on the cards tonight for an interest rate cut (most expecting a 25bp cut).

It seems the election is too close to call right now which is not helping the indecision out there. What it means for either Obama or Romney win is not quite clear in terms of market reaction at the moment as a flight to the US dollar is a duck and cover kind of strategy for investors but overall I would expect the markets to drift higher over the coming weeks owing to the removal of the overhang of indecision owing to the elections and if congress can display an actual willingness to come together to deal with the dreaded fiscal cliff, this is the one of the biggest risk to markets at the moment, and the republicans and democrats need to actually get together and figure this mess out regardless of who the victor is tomorrow, something which the republicans have seemed very lackadaisical about doing while Obama has been in office.


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