Who won? Who lost?
Who cares? The perceived winner of Monday night’s Clinton-Trump debate is sort of an abstract distinction until Election Day.
That is not the case, however, for people who have money in the game — gamblers, for one, but, more particularly in this election, currency traders.
They decided about 15 minutes into the debate that Clinton was the winner. And it wasn’t even close.
“Forex markets hand debate to Clinton,” declared the Financial Times headline.
“Mexican Peso Jumps, Stocks Rally as Clinton Seen Winning Debate,” said Bloomberg.
“There’s a thing called ‘Trump thermometer,’ ” David Bloom, London-based global head of forex strategy for HSBC Bank, told Reuters. “If you want to know who won the presidential debate, don’t go to Twitter or Facebook. Just look at the dollar/Mexico peso.”
The reason for their conclusion, as the Bloomberg headline suggested, is that the Mexican peso and the Canadian and Australian dollars surged in value relative to the U.S. dollar almost as soon as Trump opened his mouth. (That means, for example, that your peso would buy more in dollars after the debate than before.)
The yen, by contrast, declined.
Don’t get it? Don’t worry.
Sean Callow, Sydney-based senior currency strategist for Westpac Institutional Bank, explained in an interview with The Washington Post.
Traders fret, with good reason based on his comments, that Trump will be bad for trade, particularly for trade with Mexico and Canada. “Trump has made trade policy such a key part of his platform. So there was a lot of focus on Trump on the trade side and today was the first chance we really had to have a market test of it.”
If Trump is bad for trade, that’s bad for Mexico and the peso, as well as the Canadian and Australian dollars, and vice versa.
Conversely, what’s good for Clinton is good for those currencies.
The timing of the debate created a particularly pure test, Callow said, because nothing else was going on to roil the markets as traders watched the debate on their Bloomberg terminals.
So the fact that traders were buying the peso, normally a “quiet” currency, said Callow, and the Canadian and Australian dollars, was a sign that they believed Clinton was winning.
That did not change through the debate, he said.
“A market judgement was forming that Clinton was doing well and Trump was not,” he said.
The yen, on the other hand, is a safe haven, a currency to buy when a trader thinks the rest of the world, particularly emerging markets, is headed for trouble. Trump is trouble, as far as trade is concerned.
So what’s good for Trump is good for the yen.
As it happened, the yen declined relative to the dollar, another indication of the market’s verdict.
As the Financial Times explained:
The foreign exchange market’s conclusion: that Hillary Clinton put on a more convincing show than Donald Trump, that the US relationship with its immediate neighbours will remain where it is, and that the yen will not, for now at least, be called upon to perform its traditional role as a safe haven currency in times of profound global uncertainty.
Stock traders reached the same conclusion. The S&P 500 futures traded higher as Trump was talking, along with the peso and the Canadian and Australian dollars.
Some found this phenomenon quite remarkable.
“It’s very rare,” a currency trader at a Japanese firm told the FT, “that you have a whole market responding to the tone of one person’s voice when that person isn’t a central bank governor.”
It happens that gamblers reached the same conclusion.
A Clinton contract on the popular PredictIt betting market gained 6 cents from the previous day’s level to 69 cents, while a contract favoring Donald Trump’s prospects for victory tumbled 7 cents to 31 cents. … The price swings for both candidates were the largest since early August, and placed Clinton’s lead in that market at the widest in about two weeks.