US Presidential Election 2016: How did financial markets react to the first debate between Hillary Clinton and Donald Trump?

Jake Cordell
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US Presidential Election debate: Hillary Clinton shakes hands with Donald Trump
Donald Trump and Hillary Clinton faced off for the first time as presidential contenders last night (Source: Getty)

Financial markets have decided Democrat Hillary Clinton came out on top in the first US presidential debate last night, as stock markets rallied and key currencies soared.

In a pattern which should sound familiar to UK market-watchers over the last few months, markets have started to move back-and-forth in response to developments on the campaign trail.

Good news for the Republican candidate Donald Trump has resulted in a mini rush to safe havens and a fleeing of currencies such as the Mexican peso, which are closely tied to the US economy.

"There's a thing called 'Trump thermometer'," said David Bloom, head of forex strategy at HSBC.

"If you want to know who won the presidential debate, don't go to Twitter or Facebook. Just look at the Mexican peso."

During last night's battle, the first of three head-to-head debates between Clinton and Trump, the Mexican peso surged, Asian stock markets climbed and the yen - which does well in times of uncertainty - slipped back. All of which has been interpreted as a sign Clinton had the better of her opponent.

Coming off a record low the peso strengthened by two per cent to hit 19.4754 against the US dollar. The Canadian dollar also spiked during the debate, rising by half a cent to stand at CAD 1.3260 against the greenback, before falling back once the affair had been wrapped up.

The 90-minute debate which took place last night, was surprisingly gaffe-free from a campaign which has been marked by controversial statements from the New York tycoon who surprised most to scoop the Republican Party nomination earlier this year. Clinton landed blows by branding his economic policy "Trumped-up, trickle-down", while Trump attacked his adversary for lacking stamina and for being associated with job losses across parts of industrial America.

Read more: Would a Donald Trump presidency lead to a stronger US dollar?

At one point, Trump also said it was "smart" that he managed to not pay federal taxes in at least two years in which he was forced to declare his tax returns. The billionaire has so far refused to publish his latest tax returns, as Clinton has done, pledging only to do so when his Democratic rival publishes the contents of emails which were deleted from her private server.

"It may be that Clinton did a little bit better than was the initial expectation, or you could say that Trump didn't surprise in any way. Maybe the market was afraid that he was going to have something up his sleeve to surprise and make him look good," said Jasper Bargmann, head of trading at Nordea Bank.

Clinton was widely expected to come out on top in the affair, although Democratic strategists were nervous that because the expectations for her rival were so low he could secure an easy victory.

With two more debates and 43 days to go until the 8 November election, markets are expecting plenty more movement back and forth. The financial markets may have given round one to Clinton, but as the EU referendum showed, they get it wrong from time-to-time.

City AM Who do you think will win the US Presidential Election?