Spooky Markets Ahead of the US Elections
As we enjoy the beauty of changing leaves and the crisp air signaling the arrival of colder days, it’s a time of reflection and anticipation. With the US elections approaching, global markets are watching to see what shifts may occur as we move through this spooky season. While this time of year can feel a bit unsettling, with GPS Capital Markets’ tools and information, your financial strategy can remain strong and well prepared.
The Dollar’s Ghostly Climb 👻
The US dollar index is casting a long shadow, surging to a three-month high of 104.636—a minorly spooky 4.47% increase since September 27. This chilling rise, influenced by the upcoming US elections, is creating waves in global markets and through major currencies.
The minutes from the Fed’s August policy meeting revealed that FOMC members are comfortable with the current course for inflation. Election coverage has pushed Fed policy coverage out of the headlines, but the FOMC’s next policy decision is next week on Thursday Nov 7th. Markets are pricing in a high probability (97.8%) of a rate cut.
Spooky Shifts in APAC Markets 🎃
In the Asia-Pacific region, we’ve seen the US dollar’s earlier softness briefly support currencies like the AUD and NZD. However, as the dollar flexes its muscles again, the Australian dollar is hovering around 0.6750, leaving traders to ponder the next moves from the Fed.
Meanwhile, Japan’s yen is holding near a three-month low, struggling to regain its footing after a challenging electoral outcome for the Liberal Democratic Party. The central bank is expected to keep its policy rate unchanged at its meeting later this week, and Governor Kazuo Ueda’s comments in the post-decision press conference will be closely examined for signs of increased uncertainty. Carry traders are cautiously re-entering yen-funded plays, but with key risks on the horizon, especially ahead of Friday’s non-farm payrolls report and the US election, sentiment remains delicate. Additionally, Australian rate cut hopes are now priced in at 95%, diverging from the RBA’s guidance, creating mixed signals in local bond markets.
Job Market Mysteries Unravel 🕸️
In the US, job openings came in below expectations for September at 7,443k, while consumer confidence surged to 108.7, the highest since January. This combination of robust confidence and weaker job growth paints an eerie picture of economic resilience in a tight labor market. For businesses in APAC, a strong dollar raises import costs, particularly on commodities and recent signals from the U.S. labor market add layers of uncertainty for growth. European markets are similarly cautious, with the euro and pound hovering at key support levels.
Gold’s Spine-Chilling Highs 🎃
As we dive into this fall season, US Treasury yields are drawing attention, influencing how investors approach their portfolios. On a potential Democrat win as the Harris/Waltz ticket, Julien Dufour noted, “The focus on green energy and climate change could align well with European priorities,” potentially reducing policy volatility with a Harris administration; whereas Dufour said that a Trump administration “could act as a propeller in Europe to re-industrialization of the continent and support for growth,” potentially impacting demand for commodities like gold in uncertain times.
Dufour observed that “gold in that regard acts as an effective hedge against fears of polarization, inflation,” and suggested prices could reach $2,800 by Christmas. Investors are increasingly looking to gold as a safe haven, especially in uncertain times. This can be a reminder of how important it is to have a solid strategy in place when it comes to precious metals.
Spot gold continues to shine brightly, hitting record highs of $2,771.61 amid inflation concerns and election anxieties. This makes gold a safe haven for investors, but it also highlights the importance of hedging strategies that GPS provides. As we see support for commodities like iron ore rising, it’s clear that the market is looking for stability in these uncertain times.
