Despite the weekend developments, Trump is within a polling margin of error of gaining the Presidency of the US. The system of polling and electoral colleges means that it’s far more nuanced that just looking at the national polls and predicting from there. What matters are the key swing states, which will basically make or break the election for either candidate. Even though stock markets and other market risk indicators have been in retreat over the past few trading sessions, it’s fair to say that they have not fully discounted a Trump victory by any means.
With the FBI announcement yesterday relating to their investigation of Clinton’s emails, the dollar has gained in the Asia session, along with the dollar and also that barometer of Trump fortunes, the Mexican peso. On the other side, the yen has lost ground against the dollar, USDJPY moving towards the 105 level. Despite this, it’s still too close for market to get comfortable. It’s clear that Trump is the candidate that would place create more instability for the US economy and markets, just from the fact that his intended policies are more radical and more far reaching that Clinton’s. As such, the next two trading days are likely to be very laboured, with larger investors reluctant to change positioning ahead of the event. It’s no great surprise to see the VIX at level last seen around the UK referendum late June, reflecting the heightened degree of uncertainty currently prevailing. This also holds true for FX, with similar volatility measures (such as the DB CVIX), although not as such extreme levels, still holding well above the levels prevailing a month ago.