The US Presidential election is growing ever nearer and the markets are becoming more considered. The markets will though be looking towards crucial economic growth data this week which will indicate how the UK is performing post Brexit and a first look at Q3 GDP in the US as traders price in a Fed hike in December.
As we move closer to just over two weeks before the US elects a new President, are markets moving a bit more with caution? It is interesting to see that despite the US dollar strength (drive even further following the dovish ECB meeting), there is an improving performance of the safer haven plays once more. The classic yen, gold and Treasuries triumvirate have started to pick up again. The gold price may be bottoming after a big sell-off, but there is an outperformance developing, whilst the yen is resisting the dollar bulls and also finding traction against other major currencies again. Furthermore, Treasury yields are also beginning to pull lower again. Could it be that the big evens that 2016 may be remembered for are getting closer? The Presidential election and the prospective FOMC rate increase. Aside from the first look at how the US economy performed in Q3, there is another intriguing event this week. The preliminary look at UK GDP growth in the first full quarter following the EU referendum. Remarkably, the final reading of Q2 (which accounts for a lot of the late data around the time of the referendum) was upgraded to +0.7%, whilst economic data has been positive in the past few months, with a rolling three month average of retail sales the highest since February 2015. Will the UK consumer help GDP to beat the +0.3% forecast? It is likely to be the lack of investment amidst the Brexit uncertainty that would account for the drag.
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