US First Debate triggers risk appetite rally: No rate hike in 2016?


The US First Debate triggers risk appetite rally with the Mexican peso leading, while bonds declining. Analysts believe that the likelihood of the December rate is down. How did the debate affect the global markets?

27 September, AtoZForex The First Presidential debate had influenced the global markets in a broad way, as they declared Hillary Clinton a winner of the debate session.

US First Debate triggers risk appetite rally

Moving on to the specifics, the Mexican peso now appeared stronger against the US dollar, where the equities are rising and bond prices are headed down. The analyst at Citi stated that:

“Hillary Clinton appears to have edged above her Republican opponent Donald Trump in the first presidential debate if market reaction is a barometer to read this.”

S&P 500 futures went up 0.6 percent and Stoxx 600 Index is also up 0.3 percent in the wake of mainly positive Asia-Pacific session. The Stoxx dropped 1.6 percent on Monday, with banks being concerned about the stance of Deutsche Bank, yet the industry is struggling to recover in the new session.

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The US First Debate triggers risk appetite rally, the market observers believe that political concerns are another issue in Wall Street’s financials’ weakness. A number of investors are concerned that in case Trump wins the elections, his policy of reconsidering the trade pacts could possibly lead to the economic and diplomatic dislocation. Therefore, the fact that the S&P futures rebounded and the Mexican peso firmed could be considered as a signal that traders believe in Hillary’s win.

No December rate hike?

The analyst at DBS has commented on the matter. Stating:

“Emerging markets … fear that free trade globally would suffer under Mr. Trump. Here, the Mexican peso is regarded as a barometer of risk for emerging markets. To be fair, the Mexican peso has also been depreciating on a widening current account deficit over the past few quarters.”

Furthermore, the Canadian dollar is up 0.4 percent, where the price of gold dropped 0.1 percent to $1,337 per ounce. The yield on 10-year US Treasuries went up 1 point to 1.60 percent, where 10-year German Bunds are stable at -0.11 percent.

A number of experts believe that the likelihood of Trump presidency may diminish the chances of the Federal Reserve (Fed) having to raise the interest rates, as the central bank might be cautious of tightening policy in such turmoil. Therefore, the policy-sensitive 2-year US government bond yield is climbing up 1bp to 0.77 percent as markets’ expectations regarding the December rate hike are down.

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