Daily Market Update

After Strong Monday, USD Consolidates Gains

October 22, 2024

The United States Dollar is consolidating yesterday’s gains this morning and trading close to flat against most of the G10, with a couple exceptions

Overview

Treasury yields continue to be a heavy focus of FX markets ahead of the US presidential election in just 2 weeks’ time. The US 10-year yield touched 4.20% overnight, and 2-year pricing continues to rise as both election jitters and repricing of Fed expectations drives traders away from bonds and into the Dollar instead. US equities, for their part, slid yesterday in response and are set to open lower.

Election premiums are now a main driver of USD pricing and look to continue to be so in the last 14 days before election day, though early voting has already begun in many places. Current polling has the two major candidates functionally in a dead heat, but betting markets have swing a bit to favor former President Donald Trump on roughly 60/40 odds. The possibility of a second Trump administration, with all its promised tariffs and spending, has boosted USD in a major way over the last few sessions as such policies do risk a return of high inflation and, in turn, less room for the Fed to ease monetary policy. Add to that recent strength of US economic indicators, though admittedly lagging indicators, and the Bloomberg Dollar Spot Index is now sitting just off its highest point since July. A Harris administration, by contrast, would align with a more steady path for USD rather than the potential for a renewed Dollar resurgence that could be presented under Trump’s proposed policies.

Geopolitics, as well, is adding the the anxious global dynamic further today as US Secretary of State Antony Blinken lands in Israel to attempt yet again to broker a ceasefire deal between Israel and Hamas. Oil prices have continued to rise as regional risk increases, and gold futures are setting record after record as the precious metal’s hedging allure grows both from Middle East tensions and US election risk

 

What to Watch This Week…

  • Bank of Canada Rate Decision, Wednesday
  • UK OCT Prelim PMI, Thursday
  • US Durable Goods Orders, Friday 10AM
  • WEBINAR: Navigation Election Uncertainty – Oct 23 @ 2pm EST
  • Monex USA Online is always open

View Economic Calendar

 

EUR ⇓

The single currency’s grind lower continued in the US session yesterday and the Dollar is consolidating its gains this morning, trading close to flat at the US open today. The divergence in rhetorical tone between the European Central Bank has been a primary driver of pricing since the ECB’s decision to cut interest rates by 25 basis points last week. Christine Lagarde flagged in her remarks following the decision the ongoing weakness of the Euro-area economic picture, and by contrast, the US economy continues to hold fairly strong. Current interest rate swaps place the ECB ahead of the Fed in easing for the next few months.

 

GBP ⇓

Pound Sterling, similar to its European counterpart, is extending its recent losses today and is close to breaking below its 100-day daily moving average as Bank of England Governor Andrew Bailey looks set to continue his streak of dovish rhetoric today. Especially given a soft September inflation print, and as markets prepare for new Chancellor Rachel Reeves’ budget next week, GBP has increasingly been on the back foot in risk-averse trading. The UK does see an October preliminary PMI reading later this week, expected to show very mild price growth from the producer side.

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