Rae Wee provides an update on the European and global markets for the day ahead.
Investors closely watched the first US presidential debate between Democratic President Joe Biden and his Republican rival Donald Trump early Friday afternoon, as the two men faced off on stage ahead of the US elections in November.
The debate did little to move the markets, but it probably did little to assuage concerns about the country’s political and economic future.
Mr Biden, whose voice is hoarse from a cold, stumbled over his words several times, while Mr Trump said the tariffs would reduce deficits and not increase inflation.
Following this debate, Mr. Trump’s chances of victory have decreased slightly, which could translate into upward inflation risks.
This would mean the Federal Reserve would hold rates longer, U.S. Treasury yields would remain high, and the dollar would remain resilient.
The dollar hit a 10-day high against the Mexican peso and climbed against other trade-sensitive currencies, including the Canadian dollar, in the wake of the debate.
The main market event is the release of the U.S. personal consumption expenditure (PCE) price index – the Federal Reserve’s preferred measure of inflation – later on Friday.
The core PCE price index is expected to rise 2.6% on an annual basis in May, slowing from 2.8% in April. If the data comes in line with expectations, that will likely support the Fed’s bets that it will launch its easing cycle in September.
Analysts are, however, skeptical about the dollar’s downward trend. Major central banks have already started to ease monetary policy and there are a number of risks facing other economies, such as political unrest in Europe.
The first round of French elections is due to begin this Sunday.
Perhaps the biggest victim of the dollar’s continued strength is the yen, which fell again to a 38-year low on Friday.
The dollar easily broke through the 161 yen level to reach 161.27 yen, while the euro also reached a record high against the Japanese currency.
The appointment on Friday of a new diplomat in charge of the foreign exchange market fueled expectations of imminent action by the authorities to support the yen.
Also on Friday, separate data showed that core inflation in the Japanese capital accelerated in June, while industrial production rebounded nationally in May.
Main developments likely to influence the markets on Friday:
– US Core PCE Price Index (May)
– UK GDP IN THE FIRST QUARTER
– Import prices in Germany (May)
