05/11/2024 - 08:59 UTCLittle change was seen on Monday in the price of the dollar against other major currencies, with the dollar index down by a mere 0.06%, ahead of the U.S. presidential election, where recent polls showed improved odds for Kamala Harris against Donald Trump, although Polymarket bets continues to show Trump leading by a wide margin. Polls on the other hand show a tight race, with a weekend opinion poll showing Harris with a surprise lead in Iowa, a traditional Republican stronghold.
Furthermore, market participants were betting on a quarter-point rate reduction by the Federal Reserve at the end of its latest two-day policy meeting on Thursday. This expectation followed the central bank's substantial half-point rate cut in September. According to the CME Fedwatch tool, expectations for a cut of 25 basis points in the upcoming FOMC meeting later this week currently stand at 98% while odds for rates to remain unchanged are at 2%.
Wall Street is largely on edge before the outcome of the presidential election in the US, with analysts indicating that the outcome could significantly impact the market performance, especially the large cap technology companies. Volatility is subdued, with the VIX down by 4.64% on Monday, while the main stock market indices, all ended the session with minor losses as investors appear to be holding back on risk-driven assets.
Although the majority of companies reported stronger-than-anticipated earnings for the third quarter, a pessimistic outlook from leading technology firms, such as Microsoft and Apple, coupled with projected increases in capital expenditures, exerted downward pressure on the technology sector.
In corporate news, NVIDIA Corporation is set to join the Dow Jones Industrial Average on Friday, replacing struggling chipmaker intel. The earnings season will continue this week with releases from Ferrari, Super Micro Computer, Qualcomm, Arm, Gilead and Biontech.
Aside from the U.S. presidential elections and the Fed interest rate decision, other key events due later this week include the ISM services PMI and UoM consumer sentiment and inflation expectations survey.
The EUR/USD pair ended the session with slight gains on Monday, as the US Dollar weakens amid anticipation of the US presidential election outcome and a likely interest rate cut from the Federal Reserve.
The US presidential race remains close, with Vice President Kamala Harris and former President Donald Trump almost tied in recent polls. Results may take several days to finalize.
The expectation of a Federal Reserve rate cut at its November meeting is also pressuring the Dollar. Markets are pricing in a high likelihood of a 25-basis-point cut on Thursday, as opposed to the more substantial 50-basis-point reduction seen at the last meeting.
Meanwhile, the Euro is finding support as recent Eurozone economic data has reduced the likelihood of a larger interest rate cut from the European Central Bank (ECB) in December.
The upcoming November inflation report from the Eurozone could offer additional insight into the ECB’s rate outlook, potentially influencing the Euro’s trajectory as traders weigh the possibility of further ECB easing.
Gold prices ended the session almost unchanged on Monday amid a weaker dollar and rising uncertainty surrounding the US presidential election.
With the election set for Tuesday, polls show a tight race between former President Donald Trump and Vice President Kamala Harris, with particular focus on seven battleground states expected to determine the outcome.
Gold also gained support from a recent decline in the US Dollar, which retreated from three-month highs following last week’s soft payrolls data.
The weaker jobs data is expected to keep Fed Chair Jerome Powell leaning toward a more dovish stance in Thursday’s policy meeting.
Oil prices rose sharply on Monday, driven by OPEC+'s decision to postpone its planned production increase by another month. Investors were also closely monitoring the upcoming US presidential election.
OPEC+ announced on Sunday that it would extend its current production cut of 2.2 million barrels per day (bpd) through December. The increase, originally slated for October, was delayed due to lower prices and weaker demand.
This week, markets are focused on the Federal Reserve’s upcoming meeting, where a 25-basis-point rate cut is anticipated on Thursday. Investors are also watching developments in China, where the Standing Committee of the National People’s Congress is set to discuss potential fiscal policy measures aimed at bolstering economic growth.
U.S. stocks ended slightly down on Monday after a choppy session, as investors braced for a pivotal week with the U.S. presidential election and a Federal Reserve policy announcement both on the horizon.
Both presidential candidates, Donald Trump and Kamala Harris, were in a last-minute scramble for an advantage in what polls suggest is an extremely close race.
Markets largely anticipate a 25-basis-point rate cut from the Fed on Thursday. According to CME’s FedWatch Tool, there’s a 98% chance of a rate cut, with only a 2% chance the central bank will keep rates unchanged.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.
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