Not much movement on currencies as we await NFP numbers tomorrow. Basically what I wrote yesterday continues to dominate the FX markets with traders and investors happy to “take a breather” ahead of tomorrow’s announcement.

The GBP weakened at one point below 1.31 handle but managed to find the bottom and rally back through 1.3100 towards the close in NY last night and continued the rally into the European open.  Investors and traders need clarity tomorrow before embarking on the next USD move following Pres. Yellens comments at Jackson Hole last Friday. What is “expected” (within reason) is a strong reading tomorrow will boost the USD’s chances for the coming months as financiers look to the FED to raise US rates (September and December). However having said that, I am not alone when I say I think the FED should delay hiking in September and give the US and global economies more time to regularise and stabilise. Merrill Lynch/BOA, DB, and a number of other well-known institutions have all commented recently that it is still too early to raise rates in September. What worries me and I am sure many other investors is if Mr Trump wins in November. You see as things stand we simply do not know what his economic and foreign policies are and this will create a degree of uncertainty which leads to investors potentially dumping US stocks and the USD. Mr Trump has built his business on debt. Borrow build and spend. Will he run the US economy the same way? Even his comments recently on the US’s ability to use nuclear weapons worries me. Of course saying and doing are 2 very different things but do you really want to second guess what he will do.

As far as Ms Clinton is concerned, the whole email fiasco is hot air. So what if she used her private email to communicate with people. It is not like she gave away state secrets. Mr Trump and his advisors are trying everything they can to show Ms Clinton as an untrustworthy and dangerous leader. I totally disagree, I think Ms Clinton would be an outstanding President. She has been in DC/NY for most of her working life and knows how the US “ticks”. She is likeable and more importantly the US needs some fresh blood. She has a clear foreign, domestic and economic policy which will boost US assets and more importantly the US economy. For this reason I think if Ms Clinton wins investors will pile into US assets and the USD and this will make the decision by the FED to raise rates in December a formality. In fact why not increase rates by 0.50% (in December) and that way the FED gets to kill 2 birds with one stone (delaying hiking in September vs hiking double in December). That is what I think SHOULD happen and I hope I am right.

As far as the GBP is concerned (and the EUR) vs USD (and crosses) – as per above I think traders alike will be sitting on the hands and trading sideways as they await tomorrows NFP numbers. If anything I think the GBP will trade better today and potentially test 1.32 handle. This will see GBPEUR hopefully climb towards 1.1900. I think if the FED do delay hiking in 3 weeks the GBP will bolt higher as a consequence. In fact I wonder if traders are positioning for just this regardless of tomorrow’s number. Time will tell and tomorrow at 1.30pm we will finally know where we stand.

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