A look at the day ahead in European and global markets from Rae
Wee
Investors kept a close eye on the first U.S. presidential
debate between Democratic President Joe Biden and his Republican
rival Donald Trump in early Asian hours on Friday, as the two
clashed on stage ahead of November’s U.S. election.
The debate was hardly market moving, though if anything, it
probably did little to assuage concerns about the country’s
political and economic future.
Biden – with his voice hoarse from a cold – notably stumbled
over his words multiple times, while Trump said tariffs will
decrease deficits and not increase inflation.
Market odds have narrowed slightly for a Trump win in the
wake of the debate, which could translate to upside risks in
inflation.
That would mean the Federal Reserve keeps rates higher for
longer, U.S. Treasury yields stay elevated and the dollar
remains resilient.
The dollar rose to a 10-day high against the Mexican peso
and climbed against other trade-sensitive currencies,
including the Canadian dollar, in the wake of the
debate.
The main market event is the release of the U.S. core
personal consumption expenditures (PCE) price index – the
Federal Reserve’s preferred measure of inflation, later on
Friday.
Expectations are for the core PCE price index to have risen
2.6% on an annual basis in May, a slowdown from April’s 2.8%.
Should the data line up with forecasts, that would likely
bolster bets the Fed will kick off its easing cycle in
September.
Analysts, however, are sceptical about the dollar’s
downside. Major central banks elsewhere have already begun
monetary easing and there are a number of risks plaguing other
economies, such as political turmoil in Europe.
The first round of French elections is due to kick off this
Sunday.
Perhaps the biggest victim of the dollar’s relentless
strength is the yen, which on Friday again tumbled to
a 38-year low.
The dollar effortlessly barged past the 161 yen level to
peak at 161.27 yen, while the euro similarly touched a record
high against the Japanese currency.
That kept traders on their toes for potential intervention
from Tokyo, with the country’s appointment of a new top foreign
exchange diplomat on Friday fuelling expectations that a move
from authorities to shore up the yen could be imminent.
Also on Friday, separate data showed core inflation in
Japan’s capital accelerated in June, while factory output
rebounded nationally in May.
Key developments that could influence markets on Friday:
– U.S. core PCE price index (May)
– UK Q1 GDP
– Germany import prices (May)
(Editing by Jacqueline Wong)
