2-1 For a Trump Win
Some conflicting articles in the weekend press over Mark Carney's future. The Governor of the Bank of England had always aid that he'd decide by the end of this year whether to stay in his job until 2021, or to use the break clause and leave in 2018. The FT reports that he's 'ready to serve his full term' whilst the Daily Mail say he 'could quit his Bank of England role within days'. The former has sources who say he's leaning towards staying to help get us through article 50 and the divorce from Europe, whilst the latter says his 'project fear' predictions for Brexit have proven woefully inaccurate and that Jacob Rees Mogg MP – a staunch critic of Mr. Carney – will be in line to replace him. (Those wanting a more balanced argument than the Daily Mail could look at the Times, who say that Carney isn't happy with the PM's office and will likely leave in 2018) For the sake of continuity, if nothing else, it would be nice if he stayed, but as always we'll have to wait and see what he says on the matter – hopefully sooner rather than later as the press speculation mounts.
In Europe, Mariano Rajoy has been re-elected as Spain's PM. The vote took place against large anti-austerity demonstrations and even though he has the mandate, he's going to find life very difficult when it comes to getting budgets agreed and progress made.
In Italy, another earthquake. The 6.6 quake hasn't claimed any lives, but the damage is significant. Matteo Renzi will be arguing even more with Europe to allow him to break the budget deficit rules in order to rebuild and revive the damaged areas. Slightly sinister, but this could help Mr. Renzi's parliamentary reform votes later this year, if he can navigate this and present himself as a national unifier.
There's an interesting article from Bloomberg this morning on the Swiss National Bank. They say that even though the Swiss have removed the currency cap, they haven't stopped capping the currency. Four times this year we've seen sharp rebounds in the EURCHF rate when it falls to 1.08, which means the Swiss are selling Francs to buy Euros at these times. Holding European assets is problematic, because as the Franc continues to strengthen, so those assets are worth less. All the while we've got European, UK, US and global uncertainty, the Swiss are going to be facing this problem.
In the US; just as we thought we were ruling out a Trump presidency, the FBI go and throw a spanner in the works. Some straw polls following the action by them this weekend show that Trump is now level with Hillary and that the swing states are well within the margin for error. The FBI have received a warrant to examine more Clinton emails and wrote to Congress on Friday to say that they were doing this. We're eight days from America going to the polls and this throws things wide open. Those that had said they'll chance Trump not getting in and won't hedge themselves, will now be looking more closely at just what a Trump presidency does to their portfolio. The bookies odds are now back to just over 2-1 for a Trump win.
Looking to the week ahead; the normal start of the month data sets, PMI readings, non-farm payrolls et al will likely be overshadowed by the US election. That said, they might be ignored if the data is good, but if it's bad the sell-off could be over exaggerated.
Have a great week.
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