Wayne Cole provides an update on the European and global markets for the day ahead.
The dollar was shaken by a new poll in Iowa showing Democratic presidential candidate Kamala Harris ahead of Republican Donald Trump. That was enough to send the dollar down 0.9% against the yen and 0.6% against the euro, while the trade-sensitive Aussie rebounded 0.8%.
Analysts tend to think that Trump’s policies on immigration, tariffs and tax cuts would put upward pressure on the U.S. dollar and yields, much more than a victory for Mr. Harris.
The Des Moines Register/Mediacom Iowa Poll surprised everyone by showing Harris with a 3-point lead over Trump in the state, a major change from where it was a few weeks ago. This poll has a very good track record and is considered a proxy for votes in swing states.
“Since last week, Harris has enjoyed a boost in the polls, notably in the Iowa Selzer poll, which some use as a proxy for performance in the Blue Wall states (Michigan, Pennsylvania and Wisconsin)” , JPMorgan said in a note.
Betting site PredictIT showed Harris at 53 cents and Trump at 51 cents – what investors are willing to bet for a chance of winning $1 – compared to 42 cents to 61 cents just a week ago .
The poll average is still too close to know and it is entirely possible that the result of the vote will not be known on Wednesday. In 2020, for example, the election in Pennsylvania was not announced until the Saturday after the election. The results could also be challenged in court, which could take weeks.
Markets are assuming the Federal Reserve will make a rate cut on Thursday regardless of the outcome, with futures implying a 98% chance of cutting rates by 25 basis points. They also put the chance of another quarter-point decline in December at 80%, although that could easily change depending on who is elected.
The Bank of England is also expected to cut rates by a quarter point on Thursday, while the Riksbank is expected to ease rates by 50 basis points. Norges Bank and the Reserve Bank of Australia (RBA) are expected to maintain their positions this week.
The other market mover Monday was oil, which rebounded about 1.4% after OPEC+ said Sunday it would delay a planned December production increase by a month . This is the second time OPEC has extended its 2.2 million bpd cut, showing how concerned it is about global demand.
Asia in particular was weak with crude imports in the first 10 months of the year down 200,000 bpd compared to the same period in 2023, according to LSEG data.
Main developments likely to influence the markets on Monday:
– Participation of Christine Lagarde, President of the ECB, and Piero Cipollone, member of the Board of Directors of the ECB, at the Eurogroup meeting.
– ECB members appearing include Elizabeth McCaul, Frank Elderson, Christodoulos Patsalides and Claudia Buch.
– Final manufacturing PMIs for the euro zone for the month of October
– Durable goods and factory orders in the United States for September
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