The gilt sell-off subsided on Friday signalling some calm has been restored in the markets after the release of the somewhat unsettling Autumn Budget. GBP managed to claw back some of its losses ahead of this week's Bank of England (BoE) meeting on Thursday.
Initially, the USD stumbled as the latest non-farm payroll report revealed a mere 12,000 jobs added in October, highlighting the significant impact of recent hurricanes across the US. Surprisingly, month-over-month hourly earnings exceeded expectations, propelling the USD to a robust finish across the G10 currencies, with the exception of the GBP.
*Daily move - against G10 rates at 7:30am, 04.11.24
** Indicative rates - interbank rates at 7:30am, 04.11.24
We've got a big week ahead with the US presidential election and rate decisions due out from Australia, the UK, and the States.
The US dollar performed exceptionally well over the month of October as markets positioned themselves for a Donald Trump win. This might mean that a Kamala Harris win could shock markets and the US dollar could weaken.
The Federal Reserve (Fed) and the BoE are widely expected to cut rates by 25 bps. While markets have priced in 25 bps cuts, communication on future policy will be key for the direction of each currency. It will be interesting to see whether the BoE has been swayed by last week's Autumn Budget, or if they continue to focus on domestic data in their easing policy.
The Reserve Bank of Australia (RBA) is not expected to cut rates.
Kicking off the week, the USD is showing signs of weakness as traders scale back from Trump trades in light of an unexpected twist from the Des Moines Register poll in Iowa—a state previously secured by Trump—now revealing Harris in the lead with a 47%-44% advantage.
October saw the USD flex its muscles as markets anticipated a Trump victory. However, should Harris emerge victorious, we could witness a swift sell-off of the currency. Only a complete Republican triumph would sustain the USD's upward momentum.
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