Overnight Dollar Movements Consistent with Expectation that Trump Wins Back the Presidency
October 28, 2024
The U.S. currency slipped 0.3% against the euro and sterling and 0.2% relative to the Swiss franc and New Zealand dollar. U.S. Republican presidential candidate Trump favors a weaker dollar to trim the trade deficit.
One currency that instead fell 0.5% overnight against the dollar was the Mexican peso. Mexico would take a lot of the brunt from Trump’s immigration policy plans.
Trump’s America-first foreign policy would give China and Russia more latitude to extend influence in their respective regional surroundings. Stock markets fell 0.6% in Taiwan, 0.8% in Indonesia and 0.3% in Singapore.
Three important pieces of geopolitical news this Monday are
- Israel’s long-awaited military response against Iran was a measured one that avoided a hit on oil facilities and civilian populations. The price of WTI oil consequently plunged 6.2% below Friday’s close.
- Officials at the People’s Bank of China introduced yet another tool (monthly outright repo operations) to increase bank liquidity and lend support to the ailing property and stock markets. The Shanghai Composite equity index rose 0.7% today.
- Sunday’s general parliamentary election in Japan deprived the LDP of its lower-house majority. This was only the third such time that has happened since 1955. LDP candidates won 191 seats, 68 fewer than in the 2021 election, and their junior coalition party won 24 seats, a loss of 8. Political finance scandals and higher inflation had eroded voter approval of the LDP, leading to former PM Kishida to resign less than a month ago. PM Ishiba attempt to solidify his mandate failed in that mission, but it’s not clear he will be replaced. The LDP will try to secure additional coalition partners, and the main opposition party, the DPP, has not articulated a cohesive alternative approach to government. Japan now enters a period of political uncertainty that complicates the near-term path of Bank of Japan policy. The Nikkei rose 1.8% today, and the 10-year Japanese JGB yield is two basis points higher.
Bitcoin opened this final week of October on an up-note, climbing 1.0%, while gold slid 0.3%. European equities and 10-year sovereign debt yields are modestly lower, while U.S. stock futures and the 10-year Treasury yield have risen a bit.
No major data were reported today, but investors eagerly await the release of U.S. third quarter GDP, the PCE price deflator, the employment cost index and the Labor Dept monthly figures for employment, average hourly earnings and unemployment, all due near the end of the week.
Spanish retail sales jumped 1.0% monthly and recorded their largest year-on-year increase (4.1%) in 18 months during September. Lithuanian retail sales for the same month went up 0.3% versus August and also by 4.1% compared to September 2023. In Slovenia, retail saels dropped 2.6% on month and 3.0% on year.
In Finland, which borders Russia, business confidence in October matched September’s two month low, and consumer confidence, which fell below the neutral zero level one month after Russia first invaded Ukraine, remained in the red.
Hong Kong’s January-September trade deficit totaled HKD 270 billion, down from HKD 351 billion year earlier. Sweden’s trade surplus in that same nine-month period of SEK 54.2 billion was double the year-earlier surplus. Thailand’s trade deficit of $5.96 billion in January-September widened by a modest 2.7%. Mexico’s September trade position was evenly balanced last month after posting a $4.9 billion deficit in August.
The British distributive trades index fell ten index points to -6 in October, notching its fourth sub-zero reading in five months but much less so than those in May, June and July.
Chinese industrial profits plunged 27% on month in September. As a result, the year-to-date rate of change deteriorated from +0.4% in January-August to -3.5% in the the first three quarters of the year.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Japanese election results, overnight moves in dollar, Peoples Bank of China
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