Fed to deliver 25bp cut on Thursday

Matthew Ryan, CFA Ebury

The apparent increase in support for Kamala Harris in the polls in the past few days has not necessarily been reflected in a broadly weaker dollar, perhaps attesting to the fact that markets were barely pricing in a Trump victory, and that the ‘Trump trade’ provided little more than modest support for the greenback.

This suggests room for a sizable dollar rally in the event of a Trump win on Wednesday morning, particularly under a Republican controlled Congress, while we think that a Harris victory would be bearish.

Last Friday’s weak labour market report contradicted strong third-quarter GDP data in the US, but this was blamed primarily on hurricane distortions. Wage and inflation data continue to show resilience and were it not for the US elections would probably warrant attention from the Federal Reserve when it meets on Thursday.

While the Fed will almost certainly validate market expectations and cut by 25bps. Market attention will focus on guidance for the next and last meeting of 2024, where expectations for a pause, while low, are starting to rise.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

EUR/USD extends its optimism past 1.1900

EUR/USD retains a firm underlying bid, surpassing the 1.1900 mark as the NA session draws to a close on Monday. The pair’s persistent uptrend comes as the US Dollar remains on the defensive, with traders staying cautious ahead of upcoming US NFP prints and CPI data.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold picks up pace, retargets $5,100

Gold gathers fresh steam, challenging daily highs en route to the $5,100 mark per troy ounce in the latter part of Monday’s session. The precious metal finds support from fresh signs of continued buying by the PBoC, while expectations that the Fed could lean more dovish also collaborate with the uptick.

Litecoin eyes $50 as heavy losses weigh on investors

Following a strong downtrend across the crypto market over the past week, Litecoin holders are under immense pressure. The Bitcoin fork has trimmed about $1.81 billion from its market capitalization since the beginning of the year, sending it below the top 20 cryptos by market cap.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.