Joe Biden officially dropped his re-election bid on Sunday, bowing to mounting pressure from within the Democratic party in the wake of the president’s shambolic debate performance.
While hardly a shock, Biden’s decision increases uncertainty looking ahead to the election in November. Will the Democrats opt to put his understudy Kamala Harris on the ticket, or instead pivot elsewhere, such as to California governor Gavin Newsom? Whatever the decision, the US dollar could be in for some serious volatility this week.
Vice President Harris is currently the favourite to face off against Donald Trump. She would certainly bring some welcome energy to the campaign trail, but it would be far from a slam dunk. Harris is polling better than Biden in swing states like Pennsylvania and Virginia, but is still a point a or two behind on national vote share. The election could not be more finely poised.
Over in Europe, the pound finally fell back to earth on Friday on the back of disappointing retail data. GBP/EUR and GBP/USD each shed around half a cent, compounding losses sterling took the day before as pay growth slowed.
New UK chancellor Rachel Reeves already has a to-do list stretching half a mile. News that retail sales turned negative and that government net borrowing fell by less than forecast in June would have been an unpleasant reminder of the scale of her task.
Many of the key cogs in the global economic machine were hit by a massive tech outage last Friday. Across the world, planes were grounded, trains were cancelled and even some GP surgeries in the UK struggled to function. The glitch was blamed on a defect in cybersecurity firm Crowdstrike’s Windows update.
Here’s what to look out for this week…
It’s a notably quiet start to proceedings on the macroeconomic front. Despite the shortage of data, markets will surely find plenty to keep them busy in the US election and predictions for global interest rate cuts.
Some much needed impetus arrives on Wednesday in the shape of German HCOB Manufacturing PMI for July along with S&P Global’s UK services and manufacturing survey.
The German Ifo business climate index features on Thursday morning before attention turns to the US. Not only does the afternoon session feature durable goods orders, it also sees the preliminary measure of US GDP in the second quarter of 2024.
The Federal Reserve will be looking keenly ahead to Friday for core PCE price rises. It’s a fairly well known secret that Jerome Powell and co favour this metric in measuring inflation, so don’t be surprised if the data results in significant volatility for the US dollar, one way or the other.
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