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FOREX: Greenback Softer, But Conviction low Pre-Election Results

FOREX
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  • The greenback is softer against all others early Tuesday, but pullbacks are shallow and general market conviction light. The election booths open today, with results due to filter through across the key swing states overnight, which should provide a indication for the victor of the US election around halfway through the Asia-Pacific session. Trump remains the betting-odds implied favourite, however the narrowness of recent polling data shows the results remain too close to call at this stage.
  • Overnight FX options contracts now capture the immediate outcome of the election, and the impact is clear to see - USD vols are well bid, with the currencies seen as most exposed printing a considerable risk premia. As a result, USD/MXN overnight implied has cleared 100 points - that's an all-time high for the contract (other notable prints: 95 points mid-COVID, 96 points on Trump's '16 election and ~100 points in the '08 GFC). This implies a ~4% swing in USD/MXN on the results, and an implied range of approximately 19.35 - 21.05.
  • The RBA kept policy rates unchanged in overnight trade, and retained a hawkish tone on policy. Markets have continued to push back on expectations of a first RBA rate cut, which may now not be until H2'25 - a prospect that's supporting AUD against most others into the NY crossover.
  • Markets are likely to look through today's trade balance stats as well as the ISM services numbers for October, with the looming election results the key focus ahead. There are a number of speakers, including EC's Lagarde & Schnabel, while the BoC minutes are also set for release.
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  • The greenback is softer against all others early Tuesday, but pullbacks are shallow and general market conviction light. The election booths open today, with results due to filter through across the key swing states overnight, which should provide a indication for the victor of the US election around halfway through the Asia-Pacific session. Trump remains the betting-odds implied favourite, however the narrowness of recent polling data shows the results remain too close to call at this stage.
  • Overnight FX options contracts now capture the immediate outcome of the election, and the impact is clear to see - USD vols are well bid, with the currencies seen as most exposed printing a considerable risk premia. As a result, USD/MXN overnight implied has cleared 100 points - that's an all-time high for the contract (other notable prints: 95 points mid-COVID, 96 points on Trump's '16 election and ~100 points in the '08 GFC). This implies a ~4% swing in USD/MXN on the results, and an implied range of approximately 19.35 - 21.05.
  • The RBA kept policy rates unchanged in overnight trade, and retained a hawkish tone on policy. Markets have continued to push back on expectations of a first RBA rate cut, which may now not be until H2'25 - a prospect that's supporting AUD against most others into the NY crossover.
  • Markets are likely to look through today's trade balance stats as well as the ISM services numbers for October, with the looming election results the key focus ahead. There are a number of speakers, including EC's Lagarde & Schnabel, while the BoC minutes are also set for release.