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What’s happening: The US dollar fell to a two-week low on Monday, ahead of the Presidential elections in the country.
What happened: Opinion polls showed a tight race between Democratic candidate Kamala Harris and Republican candidate Donald Trump to the US White House.
Investors also monitored the monetary policy outlook, with the US Federal Reserve scheduled to announce its rate decision this week.
Why it matters: Last month, there were growing speculations of Republican candidate Donald Trump winning the Presidential race. Analysts expect his victory and policies on tariffs and tax cuts to put upward pressure on inflation again and support the greenback.
However, polls showed that Kamala Harris has gained support in major swing states, which could result in investors unwinding some of their Trump-related trading positions.
The US dollar came under pressure after a poll showed Harris with an unexpected lead in Iowa. Other polls also signalled Harris slightly ahead in Nevada, North Carolina and Wisconsin.
The US Federal Reserve is scheduled to announce its policy decision on Thursday, with markets expecting the central bank to cut rates by 25 basis points (bps). Traders also widely expect another rate cut of 25bps in December.
Data released last week showed that the US economy added 12,000 jobs in October, versus 223,000 in the previous month. The figure was much lower than market expectations of 113,000. Average hourly earnings gained 0.4% to $35.46 in October, while the unemployment rate coming in unchanged at 4.1%.
The EUR/USD forex pair gained around 0.4% to 1.0879 on Monday. The USD/JPY fell more than 0.5% to 152.13, while the AUD/USD added around 0.4% to reach 0.6586.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.4% to 103.89 on Monday, after hitting its weakest level in two weeks earlier in the session.
What to watch: Investors await the release of economic data on balance of trade and services PMI from the US today. The trade deficit in the US, which shrank to $70.4 billion in August, is expected to increase to $84.1 billion in September.
Analysts expect the ISM services PMI to decline to 53.8 in October, from 54.9 in September. The S&P Global Composite PMI is projected to increase to 54.3 in October, from 54.0 in September.
Context: British stocks closed mixed on Monday, as investors assessed the central bank’s monetary policy outlook.
Details: The Bank of England is set to meet on Thursday and will announce its latest interest rate decision. Markets widely expect the BoE to lower its benchmark interest rate by 25 basis points (bps).
Data released on Friday showed the S&P Global flash manufacturing PMI slipping back into the contraction zone. UK’s manufacturing PMI fell to 49.9 in October, from to 51.5 in the previous month, coming in below market estimates of 51.4. This was the first decline in the region’s factory activity since April.
Most sectors of the FTSE 100 index gained during Monday’s session. Shares of NatWest and DS Smith climbed during the session. Shares of HSBC and Barclays added 1% each. Burberry’s stock surged around 6% on speculations of Italian Moncler considering a takeover bid for the company.
London’s FTSE 100 gained 0.09% to close at 8,184.24, while the domestically focused FTSE 250 index slipped 0.09% to settle at 20,461.29 on Monday. Meanwhile, the STOXX Europe 600 Index fell 0.33% to settle at 509.21.
What to watch: Investors await the release of economic data on services PMI, composite PMI and new car registrations from the UK today. The S&P Global UK Services PMI is expected to decline to 51.8 in October, from 52.4 in the previous month. Analysts expect the composite PMI to slip to 51.7 in October, from 52.6 in September.
New passenger car registrations in the UK, which rose by 1% year-on-year in September, are expected to surge by 4.3% in October.
Other Markets: US trading indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.61%, 0.28% and 0.35%, respectively.
Ukraine’s military forces hit North Korean troops for the first time after entering the ongoing war on Russia’s side. The news sent the RUB/USD pair lower in forex trading this morning.
Ireland’s AIB services PMI fell to 53.8 in October, from 55.7 in September, exerting pressure on the EUR/USD forex pair.
Singapore’s S&P Global PMI declined to 55.5 in October, from 56.6 in the previous month, which sent the SGD/USD pair lower in forex trading this morning.
UK’s retail sales grew by merely 0.3% on a like-for-like basis in October. This marked a significant easing from the 1.7% surge recorded in September and exerted pressure on the GBP/USD forex pair.
South Korea’s annual inflation rate fell to 1.3% in October, from 1.6% in the previous month, which sent the KRW/USD pair lower in forex trading this morning.
South Africa’s S&P Global PMI, France’s industrial production and government budget value, Spain’s unemployment change, Brazil’s services PMI and composite PMI, Canada’s balance of trade, composite PMI and services PMI, US Redbook index, total vehicle sales, logistics manager’s index and API crude oil stock change, Mexico’s government budget value, Germany’s new passenger car registrations, Spain’s consumer confidence, as well as Italy’s new passenger car registrations.
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