Obama On Course To Win
FX markets in Asia overnight found themselves at the mercy of US election headlines as the counting got underway. US 10y yields fell 7bp from the Tokyo open and USDJPY soon slipped back below 80.00 as provisional tallies pointed to an Obama victory. Several news networks – and Bloomberg too – are calling an Obama victory at the time of writing based on projections, but we note that Romney has yet to concede defeat so investors will have to wait a little longer before a conclusive result is declared. Dollar weakness was more broad-based too, and losses were seen against the Australian and New Zealand dollars, sterling, the Swiss franc and the euro. EURUSD got a further boost when Eurogroup Chair Juncker said the Greek parliament will approve the latest batch of austerity measures at Wednesday night’s parliamentary vote. We would attach considerably less certainty to that outcome however successful passage of the legislation is not a foregone conclusion. However, local Greek media do expect the measures to be approved by a narrow margin – largely because a junior coalition party is preparing to abstain rather than vote directly against the measures. The vote is due before 22:00 GMT and, if it is carried, European finance ministers could approve the release of the next tranche of aid at their scheduled meeting on Nov. 12, although we note that further delay is also possible. Finally, back in the US,
Democrats appear to have strengthened their hold over the Senate. With the House very likely to remain in Republican hands, the stage is set for what is likely to be a protracted period of difficult negotiation as the next seven weeks takes us to the edge of the fiscal cliff (but not over it).
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank