Societe Generale’s top currency strategist, Kit Juckes, hints this morning in a note to clients that the event may have just gotten a bit more important since the hurricane.
Juckes writes that because the economic data that comes out next week during the election will be distorted by the effects of Hurricane Sandy, the focus will be even more on the election outcome in the short term:
US markets are attempting to get back to normal after Sandy’s assault on the East Coast, though with major disruptions to both power and transportation in New York, it will not be quite ‘business as usual’. Today we get the Chicago PMI, with ISM tomorrow and jobs theoretically due on Friday. After that, we can focus on the election and uncertainty as we try to divine what that means for policy, while economic data become meaningless given Sandy’s distortion.
Does this increase the risk of uncertainty and risk aversion or just allow the market to be optimistic about the US economy’s ability to avoid recession and drive asset prices higher? I suspect the latter, though weak payroll data can increase nervousness in the next few days. Today, look for higher equity price and strength in the FX equivalents, CAD and MXN, but this is not much more than ‘noise’ in a market which waits for Friday’s news.