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The US elections are set to get much more attention, for voters and markets. The first presidential debate between Hillary Clinton and Donald Trump will be held on Monday, September 26th at 9 PM Eastern, that’s 1:00 GMT.

While the event happens during the Asian session, it could have ramifications for the  next few sessions, especially the US one.

Update:  Clinton wins debate – markets cheer, USD/JPY rises

Debate background

While debated do not often totally change the course of the elections, they attract a huge audience. In 2016, the first debate comes as the race is clearly tightening  and as the candidates offer stark differences.

Markets usually prefer Republican candidates, which are seen as more business-friendly and market-friendly. This time is different: Clinton is a mainstream, well-known candidate, which  might make significant changes in various fields, but will not turn economic policy on its head.  On the other hand, Donald Trump is  always contradicting himself, and when he does offer some policy outlook, it looks  anti-trade, something markets do not like. For more, see Clinton Continuation vs. Donald Disruption.

Why Clinton could win

  1. Clinton prepares: Even if Donald Trump is not his spontaneous, off-the-cuff self, his campaign will probably prepare him for the big event. Nevertheless, he faces an opponent which does her homework and had flawless performances in previous debates in the primaries and also as a Senator and as the Secretary of State.
  2. New narrative: The media cannot repeat the same story for too long. Otherwise,  it’s not new.  The race was tight around the Republican National Convention before Clinton took the lead during the summer and recently the race has tightened for Trump. There are many reasons for each move, from Trump’s gaffes to Clinton’s, Trump’s new campaign strategy and Clinton’s foundation and email issues. Trump’s insults of a fallen soldier’s family were a clear thing and so was Clinton’s stumble after the 9/11 were clear things. But who wins a debate? Each side can claim victory, almost always. With long weeks of  a Trump catch-up, the media could go along with a “Clinton comeback” story, before going in a different direction somewhere in October.
  3. Polls are shifting:  Continuing on the previous point. Also, polls are beginning to stabilize. There is no shift towards Clinton, but at least she is leading where she needs it most: Pensylvania, Colorado and New Hampshire, and that may be just good enough. So even if Americans don’t change any of their views following the  90-minute debate, the ongoing, albeit narrow lead for the Democrat could  now be seen as significant.

If Clinton is seen as the winner, this should help stock markets and also USD/JPY. The safe-haven yen could be in high demand. If the analysis above is entirely wrong, Trump appears presidential, and Clinton underperforms, expect an adverse reaction in both stocks and dollar/yen.

In any case, there are three more debates (two between the presidential candidates and one between the vice-presidential candidates). And, central banks still have an overpowering reach, but somewhat eroding, influence on markets.

What do you think?