USD – The dollar begins the week higher against most of its counterparts as investors remain largely sidelined ahead of tomorrow’s Presidential election. While the most recent polls predict an incumbent victory, the contest should be a close one. An Obama win should prove rather dollarneutral, while a Republican upset could spark a rally in the greenback as investors price in a likely more conservative Fed with Chairman Bernanke unlikely to maintain his seat when his term expires in 2014. Aside from politics, the dollar is finding support in the continued general outperformance of the US economy. While not as strong as expected, the US service industry continued to expand in October with ISM non‐manufacturing coming in at 54.2. However, last Friday’s strong NFP report should prove supportive with more Americans bringing in paychecks heading into the holiday shopping season. The week ahead is rather back loaded with no major data due until weekly jobless claims, trade balance figures and a measure of consumer confidence are released on Thursday. The week closes out with the import price index, U. of Michigan confidence, and wholesale inventories all on Friday. The dollar will thus likely remain bound within its recent ranges ahead of the election with the continued flow of strong economic data providing support.

EUR – The euro is lower against all of its peers this morning, sliding to a two‐month low against both the USD and JPY. Greece is again becoming a cause for concern as the tenuous political coalition leading the country threatens to break apart, thus jeopardizing the nation’s future “bailout” installments. Facing an increase in popular protests and labor strikes, PM Samaras’ newly proposed wage and pension cuts are said to be his last with a parliamentary vote on the measures due as soon as this Wednesday. The tension has renewed talks of a Greek exit from the Eurozone, thus highlighting the fact that while regional policymakers have installed numerous backstops, the underlying economic deficiencies plaguing the region’s weaker economies have not been sufficiently addressed. Nevertheless, the uncertainty surrounding the US Presidential election has kept the EUR relatively well supported. However, a definitive outcome on Tuesday night could release a bit of pent up demand to sell the EUR.

GBP – Sterling is back towards the bottom of its recent ranges against both the USD and EUR as a gauge of British services unexpectedly fell. PMI services came in at 50.6, far short of the expected reading of 52.0 and down from 52.2 in the previous reading. While GDP figures showed that the British economy emerged from recession with the best growth seen since 2007, data has since been mixed. With the BoE set to meet this Thursday, and with their current asset purchase program due to expire, investors will be closely watching the policymaker’s commentary. While no change is expected at this week’s meeting, investors will look for hints of further easing before the new year.

JPY – The yen has strengthened a bit over the weekend, but remains well entrenched above the key 80.00 level. Japanese machine order data will be closely watched on Wednesday with the recent declines in the yen expected to ease a bit of the pressure on Japanese manufacturers. Current account data is also due on Wednesday with a sharp increase expected as resilient North American and emerging market demand for Japanese exports provides support. The yen will thus likely resume its recent weakening trend later this week after the results from the US presidential election are known.

Commodity Currencies – The commodity linked currencies are mixed this morning with raw good prices relatively flat. Oil and gold each gained slightly, rising to $85/bbl and $1683/oz respectively, while copper fell to $348/lb. The CAD and MXN both pulled back from their strongest levels in more than a week ahead of tomorrow’s election in the US – their main trading partner. The loonie is also slightly lower after Canadian building permits unexpectedly fell at the quickest pace in more than a year. The disappointing service‐sector data out of the US also has the CAD under renewed pressure. Meanwhile, the AUD is higher after Australian retail sales came in above forecast at +0.5% versus a reading of +0.3% last month. The RBA is set to meet today, and while lower interest rates are expected before year‐end, no change is anticipated at today’s meeting.

RMB –The Chinese yuan remains strong against the USD as China's manufacturing PMI moved into expansionary territory posting an October release of 50.2. This week will be the first stage of China’s leadership transition away from its current nine‐member Politburo Standing Committee. China’s October Services index improved from 53.7 to 55.5, improving China’s October manufacturing PMI. This improvement came just in time for the current leadership to present to the new leaders that the economy is on track before transition. Injection of liquidity is still expected to continue this week, as the CPC Congress starts on Nov. 8.

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