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With just a little over a day until the polls open on Election Day in the United States, it’s the dollar that is in focus today. Those who are watching the greenback’s movement are seeing a nice track of strength through the Asian and into Monday’s European session.

The dollar rebounded against other currencies after the Federal Bureau of Investigation (FBI) cleared Hillary Clinton of wrongdoing in the e-mail probe.

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FBI on Clinton, e-mail probe

Previously on Sunday, the FBI stated that the Democratic candidate had no case to answer over her use of private server to send e-mails during her time as the Secretary of State. This announcement had given a late boost in Clinton’s chances in the presidential race, and in turn, strengthened the dollar.

Not only with the US currency, but news of the FBI having no recommendations for criminal proceedings against the Democrat also buoyed markets.

Clinton’s campaign lost momentum in the previous week after the FBI said it was reviewing more e-mails related to her private e-mail use while she was secretary of state.

Polls reveal Clinton leading Trump nationwide in voter intentions in the November 8 presidential race. Previous polls have rattled the global financial markets and pressured the greenback lower as these indicated a rising uncertain conclusion from the US presidential election.

Electoral analysts had brought in their thoughts of a Trump win to as much as 35-40% last week following the announcement of a second investigation, and are now re-pricing in more gains for Clinton in the Electoral College.

A victory for Clinton in Tuesday’s election is expected to be less disruptive for financial markets than a win for Donald Trump. Should Clinton be seated as the first female president in the US, it would further strengthen the case for the Federal Reserve to raise interest rates in December.

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Fed rate hike: Status

On Friday, data showed that the US economy continued to create jobs at a steady pace in October, although at a slightly slower rate than analysts’ estimates. According to the Labor Department, the world’s largest economy gained 161,000 jobs in October from the preceding month.

Investors are currently pricing in a boosted 71.5% chance of a rate hike at the Fed's December meeting.

Hopes of higher rates tend to buoy the greenback, as higher borrowing costs make the currency more appealing to yield seeking investors.

However, analysts have given caution that the central bank could put raising rates on hold if the US election outcome triggers market volatility.

USD analysis

The greenback has made most of its gains against the havens from this election, such as the euro, Swiss franc and yen, and with riskier currencies like the Mexican peso soaring. As of writing, the US dollar index rallied 0.74% to trade at 97.66. It hit an intraday high of 97.81, the highest level since November 2.

Besides the dollar, the Mexican peso has been sensitive to developments in the election amid concerns that a victory for Republican candidate Donald Trump could damage the country’s economy. Currently, USD/MXN is down by 1.37% to 18.6976, as fueled hopes for Clinton to win greatly boosts the peso.

On the chart below, the current candle has significantly jumped from the previous bearish trend caused the increasing odds of a Trump victory and election tension [1]. The Bollinger bands are indicating another squeeze to come beginning today’s session [2]. It is likely expected that the dollar will trade narrowly from hereon based on this indication.

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With the race for the US presidential election tightening as the hours tick by, markets should brace themselves for one of the biggest events this year.

 

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