US: Payrolls the focus briefly before Tuesday’s election - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the release of the jobs data in the US may well end up reinforcing expectations of a fed rate hike in December but the market reaction is very likely to be delayed until beyond the result of Tuesday’s presidential election.

Key Quotes

“Our internal NFP model gives us an estimate for today of 245k, well above the Bloomberg consensus of 170k. A stronger than expected NFP print today could well prompt a muted response given opinion polls in certain key swing states (New Hampshire the latest) show a tightening in the race.

As of yesterday, according to Real Clear Politics, 115 Electoral College votes are up for grabs in key swing states. Basically, Trump needs to win nearly all of those to win the White House. One state that was really scuppering that from being plausible was New Hampshire where both RCP and HuffPost state-by-state polls had Clinton ahead by 3-4% on average. But three opinion polls yesterday had Trump ahead in New Hampshire in two of those polls.

While price action this week reflects some rebuilding of election risk premium, we would still conclude that the financial markets are still very much priced for a Clinton victory and a surprise win on Tuesday for Trump would result in some sharp initial moves higher for the yen, Swiss franc and euro versus the dollar while the dollar would surge versus the Mexican peso and other LATAM currencies, albeit to a lesser degree. This implies considerable moves in yen, euro and Swiss franc crosses versus the peso and other EMFX on a surprise Trump victory.”