Second US presidential debate sets the tone for the markets - Rabobank

Piotr Matys, EM FX Strategist at Rabobank, suggests that the outcome of the second US presidential debate sets the tone for the markets at the start of the week.

Key Quotes

“Hillary Clinton and Donald Trump exchanged personal insults during heated discussion dominated by past sexual scandals. Clinton argued that Trump’s offensive comments about women captured on video in 2005 proved that he’s unfit to be the president. While Trump apologised for his vulgar remarks, his campaign seems to be in a crisis as various prominent Republicans either withdrew their support for Trump or are considering to do so. Given that the Mexican peso – the most sensitive EM currency to the US politics – is trading marginally firmer against the US dollar so far this morning, the market declared that Hillary Clinton maintained her advantage after the 2nd verbal duel with her opponent, although the peso actually trimmed its intraday gains.

In additional to the earning season, there is more US data scheduled this week to digest with the main focus on retail sales due on Friday. After falling 0.3% m/m in August, retail sales growth is expected to recover to 0.6% m/m in September. On Wednesday, the market will be looking for more clues about the timing of a Fed hike in the minutes from the September meeting. This will be followed by a speech from Chair Yellen on Friday when we will hear comments from BoE Governor Mark Carney and his five deputies.”