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Market moves await nature of US elections. Risk appetite improves and NZD benefits. EUR/USD lower, JPY slumps

Currencies
Market moves await nature of US elections. Risk appetite improves and NZD benefits. EUR/USD lower, JPY slumps

By Kymberly Martin

The USD has been fairly range-bound as voting is underway in the US elections. The NZD and AUD have pushed a little higher in the early hours of this morning while the JPY has slumped.

Markets were generally fairly contained overnight as the US headed to the polls to vote in the election. Heading into voting, most indications were that the Democratic candidate maintained a small advantage. However, following the experience of the surprise ‘Brexit’ vote, the market is likely wary of complacency. Our global risk appetite index has just nudged its nose back above 50%, from lows of 41% at the end of last week.

The USD has traded a reasonably tight range over the past 24-hours, currently trading at a similar level to yesterday morning. The EUR/USD sits a little lower this morning, at 1.1020 currently.

There have been some glimmers of movement early this morning from currencies that are bell-weather indicators of risk appetite. The JPY has fallen quite sharply in recent trading while the AUD and NZD have advanced. Maybe the market is allowing itself to indulge in the anticipation of a Clinton victory, and the reduced uncertainty that might provide. The USD/JPY now trades at 105.10, close to the top of its range of recent months.

The AUD/USD has pushed up toward 0.7740 this morning, again flirting with the highs of its range over the past few months. Both the NAB AU business survey and China trade data passed yesterday without too much impact on the AUD.

The NZD/USD has nudged up to 0.7360 from intra-night lows below 0.7330. This move has extended the recent rise in the NZD/JPY. It has now pushed above mid-July highs and trades at 77.30, its highest level since just prior to the UK ‘Brexit’ vote.

There is little more to pontificate upon until the results of the US election are known (this afternoon/evening). As highlighted previously, a Clinton win would likely see some further extension in risk appetite, and the NZD supported. Alternative outcomes (unclear result or Trump victory) would likely result in the more pronounced market reaction. Risk appetite would be damaged and the NZD under pressure.

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