Currency markets poked and prodded their way into the new week as investors looked for direction after the weekend’s events. A shortage of economic figures meant that yesterday’s action lacked a certain impetus, but big data releases later in the week should solve that problem.
While it didn’t add much to last week’s success, the pound remains in a strong position over its rivals. GBP/USD reached its highest in almost a year on Monday as GBP/EUR clings to its two-year best.
Monday’s discussion was dominated in large part by Donald Trump’s assassination escape. Many commentators believe Trump’s survival will garner him enough sympathy to swing the election, and the image of Trump holding his fist aloft against the backdrop of the American flag could well be defining. Joe Biden’s team has paused its attack ads against Trump, for now at least.
Overnight, Trump made his first appearance since the attempt on his life at the Republican convention in Wisconsin. The former president used the chance to name Ohio senator JD Vance as his running mate.
Have markets now priced in a Trump victory? It certainly seems to be a factor for the US dollar, although increasingly confident predictions of imminent rate cuts from the Federal Reserve have been more significant.
The man at the centre of that decision, Federal Reserve chairman Jerome Powell, gave a speech in Washington last night. While Powell continued to call for caution, recent labour data has made the direction of travel seem more inevitable. Markets continue to expect two interest rate cuts before the end of the year, where just a month ago they had been expecting one.
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With action in Europe subdued, markets looked to high-profile data from China for direction. Chinese GDP growth came in at 4.7% in the second quarter, far below the predicted 5.1%, while retail sale growth was also sluggish.
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