The single biggest driver in the capital markets is the continued narrowing of the US election polls. The prospect of a Trump presidency and the dramatic changes that could entail is rattling investors and spurring position squaring. The dollar is broadly lower as are stocks. The surge in global yields has been arrested.  

Even before the FBI announced a re-opening of the investigation into Clinton’s emails, Trump has been recovering from the deep hole dug in recent weeks. However, over the past five days or so, he has recovered further, and the much-watched fivethirtyeight.com has tracked a 10 percentage point decline in the likelihood of a Clinton victory to now just below 72%. Another poll tracker and analysis site, Predictwise, puts the odds at 84% chance, down from 90% over the past two weeks.  

There are two important considerations that will keep investors on edge. First, the odds have yet to bottom. The swing in opinion is a gradual process, and the momentum still is building. Second, time is of the essence. The election is a week away. However, there is a significant mitigating factor. The US president is not picked by popular vote but by an electoral college. Here the projections are not as close as some of the national polls suggest. Most calculations still see Clinton securing 303 electoral college votes, while 270 are needed.  

The dollar is weaker against most of the major and emerging market currencies. Among the majors, the exception is the Australian dollar that has been dragged down by the unexpectedly sharp drop in September building approvals (-8.7%, more than twice the expected decline). Between this decline and August’s (-1.8%), July’s heady 11.5% gain has been retraced.  

Among the emerging market currencies, the South Korean won and Mexican peso are suffering the most. In South Korea, amidst scandal, the President has appointed a new Prime Minister and Finance Minister, pending parliamentary approval. Mexico has been vulnerable to the twists and turns of the US election. Local markets are closed today. The Russian rouble and Malaysian ringgit are also under pressure, apparently dragged down by the drop in oil prices. Oil prices have been sliding since early-October, but today’s losses have been encouraged by the large (~9.3 mln barrel) jump in US oil inventories, according to API. The DOE estimate is due out later today and is regarded as a more robust figure.