The U.S. Dollar is trading in mostly steady as well as mixed ranges entering a crucial 2-week period prior to the U.,S. Presidential election.
Overview
No surprises thus far as markets eagerly await to find out which way the United States will lean with so much at stake when it comes to trade. In the midst of hot conflict in the Middle East, a brand-new government in American’s most important commercial partner in Mexico, and a global growth narrative that has been downgraded recently, there is a plethora of questions as to how a Trump return could reshape foreign policy. On the other hand, markets wonder if disturbance and decline across markets will be the theme for 2025 no matter who is in office.
We have plenty of data to chew as the week progresses starting domestically with Conference Board Consumer Confidence tomorrow while Gross Domestic Product and the ADP Employment numbers are released on Wednesday. On Friday, we will get the official Non-Farm Payrolls figure. Meanwhile, there will be GDP readings for Euro-area countries and Canada with Purchasing Managers Indices from other regions sprinkled throughout. On Wednesday, the U.K. has a key moment as it presents a budget to Parliament hoping to end an era of austerirty in the country. Expect takes on China’s developments as numbers from there also paint a picture going into Q4.
What to Watch This Week…
- US Conference Board Confidence on Tuesday
- US GDP on Wednesday
- US Nonfarm Payrolls, Friday 8:30AM
- Monex USA Online is always open
MXN ⇓
The Mexican Peso will continue to be a focus ahead of the election as it carries the highest overnight implied volatility over any other currency pair. There could be some talk this week about the return of carry-trade appeal as it looks like the Bank of Japan may refrain from exercising contractionary monetary policy and thus keeping a very low-interest-rate environment. Mexico has to show resilience though for Banxico not to jump into aggressive rate cuts and Gross Domestic Product reading for Q3 on Wednesday, estimated to have expanded 0.7%, will be the first item to watch for MXN to appreciate. It has fallen by 1.3% thus far this month.
JPY ⇓
The Japanese Yen dropped to its weakest level against the Buck in three months following yesterday’s snap election results, which gave no additional leverage to the Prime Minister. Expecting some wins across seats that would garner more political support for his agenda, Prime Minister Shigeru Ishiba called for legislative elections and ended up regretting it. With the ruling Liberal Democratic Party losing its majority in parliament, analysts predict a period of political instability that could jeopardize the economic progress achieved that made bets on tighter monetary policy increase for next year. It is likely the Bank of Japan will not act in the middle of market turmoil over political uncertainties.
