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Weekly Market Preview
Monday, July 22 2024
Investors were not surprised by US President Biden’s decision to withdraw from the presidential race, especially after increasing demands from within his party that he steps down following his poor performance in last month’s presidential debate with former President Trump. Markets had already anticipated Biden’s withdrawal; it was only a matter of time. Although the Democratic Party will decide his successor at their conference in August, most expectations suggest that the current US Vice President, Ms. Harris, will replace him in the presidential race. There is considerable speculation about who she will choose as her vice-presidential running mate. Although Ms. Harris’s political agenda is expected to be similar to Biden’s, her candidacy marks a significant turning point in the race. This change will undoubtedly impact the management of debates between the two parties and influence American voters’ preferences, leading to increased market volatility, particularly for the US dollar.
This week, markets are also focused on the Bank of Canada’s interest rate decision, with expectations of a 25-basis point reduction from 4.75% to 4.50% for the second consecutive time this year. Investors are keenly awaiting the Bank of Canada’s press conference for further insights on upcoming monetary policy, particularly regarding the continuation and pace of rate cuts. Additionally, traders are looking forward to the US Personal Consumption Expenditure Index report for June, the Federal Reserve’s preferred measure of inflation. Bloomberg’s expectations indicate a possible decline in the YoY PCE headline from 2.6% in May to 2.4% in June, while the YoY core PCE may drop from 2.6% to 2.5%. This could pave the way for the Federal Reserve to cut the first 25 basis points at the September meeting, with further cut/s likely during the year. A larger-than-expected decline in inflation could increase the likelihood of the Federal Reserve reducing interest rates three times in 2024.
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