A look at the day ahead in the European and global markets from Rae Wee
Investors closely watched the first US presidential debate between Democratic President Joe Biden and Republican challenger Donald Trump in the early hours of Friday morning in Asia, as the two clashed on stage ahead of the US election in November.
But the discussion had little impact on the market, although it may have done little to allay concerns about the country’s political and economic future.
Remarkably, Biden, whose voice was hoarse from a cold, stumbled over his words several times, while Trump said the tariffs would reduce the deficit and not increase inflation.
The market’s odds of a Trump victory narrowed slightly following the debate, which could translate into upside risks to inflation.
This means that the Federal Reserve keeps interest rates higher for longer, US Treasury yields remain high and the dollar remains resilient.
The dollar rose to a 10-day high against the Mexican peso, and also rose against other trade-sensitive currencies, including the Canadian dollar, in the wake of the discussion.
The main event in the market is the release of the US core personal consumption expenditures price index – the Federal Reserve’s preferred measure of inflation, later on Friday.
Forecasts show that the core PCE price index rose 2.6% year-on-year in May, a slowdown from 2.8% in April. If the data is in line with expectations, this is likely to reinforce bets that the Fed will begin an easing cycle in September.
But analysts are skeptical about the dollar’s downward trend. Major central banks elsewhere have already begun to ease monetary policy, and there are a number of risks to other economies, such as political turmoil in Europe.
The first round of the French elections is scheduled to begin next Sunday.
Perhaps the biggest victim of the dollar’s continued strength is the yen, which fell again on Friday to its lowest level in 38 years.
The dollar easily surpassed 161 yen to reach 161.27 yen, while the euro also touched a record high against the Japanese currency.
This has kept traders on guard for possible intervention from Tokyo, as the country’s appointment of a new top foreign exchange diplomat on Friday raised expectations that a move by authorities to support the yen could be imminent.
Separate data on Friday also showed core inflation in the Japanese capital accelerated in June, while factory output nationwide rebounded in May.
Key developments that may impact markets on Friday:
US core personal consumption expenditures price index (May)
– UK Q1 GDP
– Germany import prices (May)