• USD traded flat before the US presidential election.
  • EUR eases from its two-month low as regional data continues to disappoint.
  • JPY is unchanged and trading in narrow ranges against the USD.


USD – The dollar is trading flat against most major currencies prior to the results of today's US election being revealed, with incumbent Barack Obama and Republican challenger Mitt Romney running neck-to-neck in the polls. President Obama and Republican challenger Romney engaged in frantic campaign efforts to make final pleas to voters in a sprint through the swing-states that will determine who wins the closely contested race to the White House. Both candidates sought to generate a strong turnout from supporters and sway independent voters to their side in the last hours of a race that polls showed was deadlocked nationally. Obama had a slight lead in the eight or nine swing-states that will decide the race later today. However the result, USD strength will depend on the elected president’s handling of the fiscal cliff and in the medium term, their ability to craft a credible fiscal plan. The market is also watching for who will lead the Fed in January 2014, when Chairman Ben Bernanke ends his term.

EUR – The euro eased from a two-month low against the USD with the outlook clouded by uncertainty over a parliamentary vote in Greece and the risk of a deep economic slowdown in the Eurozone. The Parliament is expected to vote on Prime Minister Antonis Samaras' package of measures making it easier to hire and fire workers, and a series of cost cuts and tax hikes. Approval of the reforms and the passage of the 2013 budget are crucial to unlocking 31.5bn euros in aid from the International Monetary Fund and European Union bailout that has been on hold for months. Despite public frustration over four years of cuts that has left a quarter of Greeks jobless, the package and a tough budget, scheduled for a vote on Sunday, are expected to make its way through parliament. Greece's main public and private sector unions have planned a 48-hour strike against the legislation starting today with marches in the center of Athens where journalists, doctors, transport workers and shopkeepers will be in full attendance. The IMF/EU aid will give the economy some breathing room, but Greek policymakers have said its economy would shrink more than forecast in 2013 and debt would peak at 192% of GDP in 2014, 10% higher than earlier forecast. This outlook has increased the prospect of another round of debt restructuring, a source of conflict between the IMF and Greece's biggest EU creditor, Germany, who both privately say the Greek debt trajectory is unsustainable.

GBP – Sterling eased from a two-week low against the USD after disappointing UK industrial output data dampened prospects for a sustained economic recovery. The lower-than-expected industrial and manufacturing output underlined fears that Britain's economic recovery will falter in the final quarter of the year and will weigh on the pound in the coming months. Meanwhile, other recent data from the UK has been more upbeat, leading many investors to expect the BoE, which meets on Thursday, will hold off on more bond-buying stimulus until early 2013. Sterling's recent losses were likely halted due to even more grim Eurozone data. Investors who are nervous about the Eurozone crisis tend to buy safe-haven UK gilts, lending support to the pound against the EUR and USD.

JPY – The Japanese yen is unchanged from yesterday’s close and trading within a relatively narrow range ahead of the US presidential election. Public comments from officials at the Ministry of Finance and policymakers at the BoJ are bearish on the JPY, as they continue to suggest a confidence in last week’s easing measures and commitment toward cooperation. Additionally, the domestic political environment remains challenging, given the standoff over a deficit financing bill, as credit rating agencies have recently expressed concerns about the impact of uncertainty.

Commodity Currencies – The Canadian dollar strengthened slightly against the USD overnight, though like today’s overall market trend, it is sidelined awaiting the outcome of the election results in the U.S.  The antipodean currencies were supported by the surprising decision by the Royal Bank of Australia to leave interest rates unchanged. The AUD rose to a 6-week high in the wake of the central bank interest rate decision.

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