Important calendar events
The dollar continued declining on Tuesday, and the index dropped from 103.9 to 103.5. US treasury yields remained firm, with the US 10-year bond yielding approximately 4.29%.
The dollar has been under pressure this week due to the upcoming Presidential elections uncertainty. US voters headed to the polls on Tuesday to vote in the US Presidential and Congressional elections. The results of the elections, however, will likely not be known for some time. Polls currently show a tight race between Trump and Harris. This means that the election outcome will likely come down to a few swing states and may take days before a definite result can be reached.
The implications of the election outcome are complex and will likely cause volatility in the price of the dollar. Trump’s proposed tariffs and tax policies will support economic growth, boosting the dollar. If, on the other hand, Kamala Harris wins, she might adopt a more moderate approach to fiscal policy, which will put pressure on the dollar. High market volatility is expected if the party that wins the presidential elections also gains control of Congress.
In addition, the US Federal Reserve will announce its interest rate decision on November 7th. The US Federal Reserve is expected to lower interest rates by 25 basis points this week. Market participants will focus on Fed Chair Jerome Powell’s press conference after the meeting for hints on the Fed’s rate outlook.
The Federal Reserve cut its benchmark interest rate by 50 basis points to a target range of 4.75% to 5.00% in September, after holding interest rates steady since last July. The Fed launched its easing cycle with an aggressive rate cut, signaling the end of its restrictive monetary policy. Fed Chair Jerome Powell stated that the central bank aims to strengthen the US economy and labor market.
The US economy expanded by only 2.8% in the third quarter of 2024, after rising by 3.0% in the second quarter of the year and by 1.4% in the first quarter of the year, while markets were anticipating 3.0% growth in the third quarter of 2024. The US economy is suffering from prolonged tightening, raising recession concerns.
US inflation is proving to be sticky despite the Federal Reserve’s efforts to bring it down to its 2.0% target. Headline inflation cooled slightly to 2.4% in September from 2.5% in August against expectations of a drop to 2.3%. Monthly CPI rose by 0.3% in September, surpassing expectations of 0.2% growth. Annual core CPI, which excludes food and energy, rose to 3.3% in September from 3.2% in August. Monthly core CPI rose by 0.3% exceeding expectations of 0.2% growth.
EUR/USD rose from 1.087 to 1.093 on Tuesday as the dollar weakened. If the EUR/USD pair declines, it may find support at 1.076, while resistance may be encountered near 1.095.
Final Manufacturing PMI data released on Monday for some of the EU’s leading economies and for the Eurozone as a whole, were in line with expectations. EU Final Manufacturing PMI rose marginally to 46.0 in October from 45.9 in September against expectations of 45.9 print. The manufacturing sector remains in contractionary territory, as evidenced by a print below the level of 50.0 which denotes industry expansion.
The ECB lowered its benchmark interest rate by 25 basis points in October, bringing its main refinancing rate to 3.40%. The ECB started its easing cycle in June, lowering interest rates by 25bps for the third time this year in October.
ECB President Christine Lagarde has stated that the decision to cut interest rates was unanimous, but did not commit to future rate cuts. Lagarde stressed that economic activity in the Eurozone is slowing down inducing the ECB to lower interest rates. She also stated that policymakers are confident that inflation will drop to the central bank’s 2% target in 2025 but stressed that there are both upside and downside risks to inflation.
Inflationary pressures in the Eurozone are not cooling as fast as expected. Eurozone inflation rose to 2.0% year-on-year in October from 1.7% in September, against expectations of 1.9%. Core CPI, which excludes food and energy, also came in higher than anticipated, remaining steady at 2.7% in October, against expectations of a 2.6% print.
Preliminary Flash GDP data for the third quarter of the year showed that the Eurozone economy expanded by 0.4% in Q3 of 2024, rising from 0.2% in Q2 against initial estimates of 0.2% growth. The Eurozone economy also expanded by 0.3% in the first quarter of 2024. The economic outlook of the EU remains fragile as prolonged tightening has brought the Euro area economy to the brink of recession.
The Sterling benefitted from the dollar’s weakness on Tuesday and GBP/USD surged from 1.295 to 1.304. If the GBP/USD rate goes up, it may encounter resistance near 1.307, while support may be found near 1.284.
Britain’s new Labour Government announced its first budget last week, causing volatility in the price of the Sterling. UK Chancellor of the Exchequer Rachel Reeves revealed a 40 billion pound tax rise, which will be spent largely on the health and energy sectors.
The BOE voted to maintain its restrictive monetary policy in September, keeping its official rate at 5.25% to 5.00% after cutting interest rates in July. BOE policymakers voted to keep interest rates steady with a majority of 8-1. Bank of England Governor Andrew Bailey has stated that he is optimistic that inflationary pressures in the UK will ease sufficiently to allow for the BOE to cut interest rates further.
Market participants will focus on the BOE policy meeting this week. BOE policymakers will announce their interest rate decision on the 7th, the same day as the Fed’s interest rate announcement. Analysts predict that the BOE will lower interest rates by 25bps this week, the same as the Fed. Markets will focus mostly on the BOE’s forward guidance and Andrew Bailey’s press conference after the policy meeting.
Headline inflation in the UK dropped to 1.7% year-on-year in September from 2.2% in August against expectations of a print of 1.9%. Core annual inflation, which excludes food and energy, dropped to 3.2% in September from 3.6% in August against 3.4% anticipated. Inflation in the UK has cooled to its lowest level since April 2021 and may induce the BOE to start cutting interest rates more aggressively.
GDP data showed that the British economy grew unexpectedly in August. The UK economic outlook has improved as the British economy expanded by 0.2% in August after remaining stagnant in June and July. The British economy expanded by just 0.5% in the second quarter of the year, failing projections of 0.6% and following 0.7% growth in the first quarter of 2024.
USD/JPY dipped from 152.3 to 151.5 on Tuesday as the dollar weakened. If the USD/JPY pair declines, it may find support at 150.5. If the pair climbs, it may find resistance at 153.8.
The BOJ maintained its current monetary policy guidelines steady and its interest rate at 0.25% at its policy meeting last week. The BOJ had pivoted to a more hawkish policy at its meeting in July, raising interest rates by 15 basis points, the BOJ’s largest rate hike since 2007. The BOJ had already hiked interest rates once more in March, ending its negative interest rate policy.
Markets were not expecting a change in policy in last week’s meeting and focused instead on the BOJ’s forward guidance. BOJ Governor Kazuo Ueda delivered a hawkish speech after the policy meeting, boosting the Yen. Ueda hinted at another rate hike in the following months, if economic and inflationary conditions are met. Data emphasized, however, that the BOJ’s policy will be data-driven and stated that the central bank will scrutinize data before each policy meeting.
Inflation in Japan dropped to 2.4% year-on-year in September from 2.8% in August against expectations of a 2.3% print. BOJ Core CPI remained at 1.8% year-on-year in August, the same as in July. Annual Tokyo Core CPI fell to 1.8% in October from 2.0% in September, which was in line with expectations. Inflation in Japan remains weak lowering the odds of another BOJ rate hike this year.
Japan’s economy expanded by 0.7% in the second quarter of the year. The Japanese economy has started to expand, after shrinking by 0.5% in the first quarter of the year.
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Written by:
Myrsini Giannouli
चलनिधि प्रदाता के रूप में उद्योग उपस्थिति
और विश्वसनीय निष्पादन
ग्राहक धन
ग्राहक सहायता
अब आप जो वेबसाइट देख रहे हैं, वह टॉपएफएक्स ग्लोबल लिमिटेड द्वारा संचालित है, एक इकाई जो सेशेल्स के वित्तीय सेवा प्राधिकरण (एफएसए) द्वारा प्रतिभूति डीलर लाइसेंस संख्या एसडी037 के साथ विनियमित है जो यूरोपीय संघ में स्थापित नहीं है या यूरोपीय संघ के राष्ट्रीय सक्षम द्वारा विनियमित है। प्राधिकरण।
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