Focus on the U.S. congressional elections

Weekly Report - 05/11/2018

Focus on the U.S. congressional elections


U.S. congressional elections are due for Nov. 6, and Investors are now concentrated on that which will settle whether the Republican or Democratic Party dominates Congress. Some anticipate enhanced market volatility after the result. U.S. job growth bounced clearly last month and wages posted their greatest yearly increase in more than nine years, leading to further labor market tightening that could support the FED to increase interest rates once more next month. The United States and China are distant from settling their trade disputes. On Friday the White House's head economic consultant said he was less confident than before that an arrangement can be found.  In early Asian trade on Monday Gold prices were steady while the greenback softened, while investors are attuned into the U.S. congressional elections on Tuesday. Spot gold was calm at about $1,232.80 per ounce. U.S. gold futures were up 0.1% at $1,234.4 per ounce.

The Week that was

The United States raised Non-farm payrolls by 250 thousand in October of 2018, after a downwardly revised 118 thousand in September and much higher market expectations of 190 thousand. Job increases happened in in manufacturing, health care, transportation in construction, and warehousing. The latest announcements about the continuing US-China trade resolve strengthened the appetite for the risk assets in the Asian trading session on Friday giving the Asian assets energy to reach the top and the greenback broadly below. As a consequence, FX last Friday helped the risk-on market action, with the AUD coming back to the 0.7248 area as the Kiwi bounces quickly to test the 0.66 level. On the other hand, Yen the traditional safe-haven currency went into new offers that pushed the USD/JPY back onto the 113 level while the Treasury yields picked up bids, surging nearly 1% across the curve.


Main Focus This Week

The U.S. congressional elections on Tuesday could turn out be a very important event for the markets, should the Democrats drive the stability of strength away from the Republicans? A movement that would lead to an end of president Trump's unrestricted reign on Capitol Hill. In Europe Brexit once more in focus as both parties inch ever closer to a settlement, raising the uptick in the GBP. The week offers another great opportunity for the Pound that is capable of moving to $1.40 levels. On the China-US Trade war, negotiations are on ice while reports hit the lines of a potential trade deal with China. How China reacts to terms through the week will be important for market risk perspective and for Republican success at the mid-terms.


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