Main currency pairs treading water

The main currency pairs are essentially treading water ahead of the US presidential election. The dollar did nudge lower for a time yesterday – amid reports than Kamala Harris was performing well in some polls – but has regained ground since, trading at around $1.0890 and $1.2980 against the euro and sterling respectively. EURGBP is little changed from this time yesterday morning, hovering just below £0.84. In relation to the outcome of the election, with Harris and Trump running neck and neck, one commentator notes that, while today “America decides, the great fear is that nothing will be resolved.”

In government bond markets, US 10-year yields fell quite sharply yesterday, closing around 10bps lower on the day and reversing the equally sharp rise that occurred on Friday, while 2-year yields nudged down by around 5bps. Elsewhere, both German and UK yields were broadly flat.

Equity markets didn’t do a whole lot ahead of the election. European and US stocks both ended marginally lower, partially reversing the modest gains they made in Friday’s trading.

Economic data was thin on the ground as well. The Euro area manufacturing PMI remained well below the key 50 expansion-contraction level in October, albeit it did pick up to 46.0 (from 45.0 in September) according to the final reading.

In terms of data for the day ahead, the ISM services index and trade balance are due in the US, while a final PMI services reading for October is scheduled in the UK.