September 11, 2024

“The market reaction to the presidential debate, which resulted in USD weakness, will merge with the impact of today’s August inflation report. While the Federal Reserve has become more relaxed and less reactive to minor fluctuations in CPI figures, this is the final key data release before the 18 September FOMC meeting.”

Sam Cornford – Head of Trading

USD

Donald Trump and Kamala Harris debated key issues like abortion, immigration, and the economy for over 90 minutes. While there was no clear winner, markets slightly favoured Harris, with 63% of CNN poll respondents believing she won. A Trump win typically strengthens the dollar, which is currently weak. The August inflation report could impact the Fed’s interest rate decision, with expectations for a 0.2% rise in core CPI, although the Federal Reserve has made it clear that employment is now a greater priority than inflation.

 

GBP

GBPUSD briefly strengthened after Harris was perceived as the winner of the debate, but has since declined due to weaker-than-expected UK GDP data. Growth for July remained flat at 0.0% (compared to the expected 0.2%), with industrial production dropping by 1.2%. This undermines the narrative of UK “exceptionalism,” though it does not significantly alter the outlook for the Bank of England. EURGBP has stabilised, and tomorrow’s ECB meeting is expected to have a significant impact.

 

EUR

The US presidential debate had little effect on EURUSD, but it did provide enough temporary support to recover some of the losses from the previous session. In the next few days, the market’s reaction to the debate should become more evident. Nonetheless, we maintain a positive stance on EURUSD remaining stable leading up to the US election, with Harris’s growing likelihood of winning further bolstering this view. This week, the EURUSD movement will be primarily influenced by US events today, with the release of the US CPI and potential adjustments in market positioning related to the US election. However, attention will turn fully to the ECB meeting tomorrow. While a 25bp rate cut is highly anticipated, there is still potential for EURUSD to climb higher if short-term EUR rates are revised in a more hawkish direction.

 

Markets

Yesterday, Wall Street’s S&P 500 rose by 0.5%, but concerns over slowing economic growth kept gains in check. The Dow fell as banking shares dropped due to warnings of potential weakness in the current quarter, while energy stocks also suffered losses. European stocks were higher on Wednesday as global markets focus on the latest U.S. inflation data set to be released later in the day. The pan-European Stoxx 600 rose 0.39%, with most sectors and major indices gaining. Mining stocks led with a 1.78% rise, while health care dropped 0.49%. The UK’s FTSE 100 lagged, up only 0.12%, after data showed the economy stagnated in July, missing a 0.2% growth forecast.

Main Economic Events (All Times CET)

8:00am: UK GDP m/m
2:30pm: US CPI Inflation
3:30pm: UK CB Leading Index

 

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