An interesting 24 hours

To paraphrase one of the US presidential candidates:  it certainly was an interesting 24 hours in the political sphere on both sides of the Atlantic.

While the "Pussygate" tape has caused a furor in media and political circles, in reality it probably doesn't change the Presidential election very much, for the simple reason that we didn't really learn that much about Donald Trump from it.   If you thought that he was a close-minded, boorish vulgarian last week, the leaked tape is hardly going to change your mind, is it?  On the other hand, if you thought he was an outsider who represents a change from business as usual in Washington, the beef between him and the GOP hierarchy simply reinforces that image.  Polls seem to suggest that Trump's cadre of support remains largely intact after this scandal, which does raise the interesting question of what he could possibly do to alienate them.  (Note that this is being written before the debate on Sunday.)

Where the scandal could potentially make a difference is in the Congressional race, which was already shaping up to be a tight one.   Many in the GOP power structure clearly harbored doubts about Trump but gave their endorsement anyways;  the consternation is evident as a number of these endorsements are belatedly (and, potentially to voters, cynically) withdrawn.

It becomes an issue because a Clinton presidency with the Democrats controlling both houses of Congress is a different proposition to one in which the GOP retains control of the House (and thus, the purse strings.)  It does seems reasonable to suppose that a clean sweep would be viewed as a less market-friendly outcome, given the potential for increased regulation and government interference in the health care and financial industries, for example.  The latest odds continue to favour the GOP retaining the House, at least, but it would not be a surprise to see Democratic support rise in some local races.

In the UK, meanwhile, it was good to see the Government row back on the list-of-foreign-workers idea (at least a public list.)  With sterling clearly a talking point in UK markets (and on the street), Gilts duly broke the support identified on Friday, triggered stops....and then bounced back to close basically on the neckline.  Thanks for playing!  Regardless of what you think of the politics, further weakness seems a reasonable bet moving forwards given the impact of sterling on inflation and the government's criticisms of QE.

As for Friday's payroll data, it was kind of a blah report but certainly contained nothing to dissuade the FOMC from moving rates in December if such was their predilection.  While the headline payroll number was nothing special and the unemployment rate ticked up, the increase in both labor force participation and wages would have been a welcome indicator for the Fed.

 
Indeed, Stan Fischer's comments over the weekend sounded like they were from a man with his finger poised (gently) on the policy-tightening trigger.  In that vein, the weakness in the dollar, particularly versus the yen, looked somewhat overdone on Friday.   The decline almost certainly represents trimming from a market long a bit over its skis than a change in the perceived fundamentals, so if you liked it Thursday night you should also like it Monday morning.

The same, it appears, could be said for the presidential candidates as well....