Morning Brief – Interference

Interference

We have become increasingly accustomed of late to sideswiping headlines gripping price action and throwing currencies in entirely opposite directions. The past 24 hours provided no respite to the torrent of headlines. But the salience and long run ramifications of yesterday’s major headlines could be far more significant than we are used to. The two major new stories as European markets open this morning concern meddling in the US election and the resumption of trade talks between the UK and the European Union.

Last night John Ratcliffe, director of national intelligence in the United States, warned voter registration information had been compromised. In an impromptu press conference, the heavyweight intelligence official disclosed that voter information – names, contact details etc. – had been obtained by Iran and Russia. The claim in turn was that these nations were exploiting this data in order to “intimidate voters, incite social unrest, and damage President Trump”.

One instance of this interference is supposed to have come in the form of emails sent to voters in Florida and Alaska threatening the recipients to vote for the incumbent president, “or else”. The campaign was sophisticated with the emails purporting to be sent from far-right group, the Proud Boys. Trump was condemned in the first Presidential debate for failing to condemn “white supremacists and militia groups” when questioned. Instead, Trump responded directly to the group in his response, calling upon them to “stand back and stand by”. If this email really were initiated by the Iranian state to incumber Trump and exploit concerns over his comments, the implications could be severe for the election.

When dealing with a beast as complicated as the US election, assessing the potential impact of a claim that Russia and Iran are holding voter information is far from straight forward. Firstly, John Ratcliffe is a staunchly conservative politician who previously served in Congress as a Representative for Texas. Having only taken the office of Director of National Intelligence this year, we must question the validity of the claim. From what turned out to be an email imploring the recipient to vote for Trump has, due to context and the threatening nature of the email, become something that would be expected to deter the voter away from voting for Trump. However, what if the statement itself is false and the conservative politician is using a story of intervention by Iran and Russia to drum up sympathy for the America first preacher?

The immediate impact upon currency markets due to the new wave of uncertainty surrounding the US election that is now less than two weeks away has been a new wave of defensive demand into the Dollar and other safe haven assets. However, it will ultimately depend upon how the US electorate some 250 million strong synthesis these events that will determine its true impact.

In the UK yesterday towards the European close we learnt Brexit talks would resume. PM Johnson at the EU summit last week had claimed his negotiators would not entertain further talks given European negotiator’s unwillingness to compromise. The resumption of negotiations therefore brought with it hopes of further concessions for a more constructive UK-EU post-transition trade deal, lifting the Pound to one month highs.

Discussion and Analysis by Charles Porter

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