Market Pulse: Dollar Slumps as Harris Takes Lead in Iowa Poll
The currency market took center stage on Monday, with the US dollar suffering a notable decline following a surprise poll result in Iowa. A new survey showed Democratic presidential candidate Kamala Harris leading Republican incumbent Donald Trump, sparking a sell-off in the greenback.
Dollar Weakness
The dollar fell 0.9% against the yen and 0.6% against the euro, while the trade-sensitive Australian dollar rallied 0.8%. Analysts attribute this move to expectations that a Harris victory would put less upward pressure on the US dollar and yields compared to a Trump win.
Iowa Poll Shocker
The Des Moines Register/Mediacom Iowa Poll, known for its reliability, showed Harris up 3 points on Trump in the state, a significant shift from just a few weeks ago. This development has major implications for the swing states, with JPMorgan noting that Harris is seeing a boost in the polls, particularly in the Blue Wall battleground states.
Market Reaction
Betting site PredictIT reflected this shift, with Harris now priced at 53 cents to Trump’s 51 cents, a notable change from last week’s 42 cents to 61 cents. While the average of opinion polls remains too close to call, investors are bracing for a potentially prolonged outcome, with court challenges and delayed results possible.
Central Banks in Focus
This week, all eyes will be on central banks, with the Federal Reserve expected to cut rates on Thursday, regardless of the election outcome. Markets are pricing in a 98% chance of a 25-basis-point cut, with an 80% probability of another quarter-point easing in December. The Bank of England and Riksbank are also expected to cut rates, while Norges Bank and the Reserve Bank of Australia are seen holding steady.
Oil Bounces Back
Oil prices surged 1.4% on Monday, driven by OPEC+’s decision to delay a planned December output hike by one month. This move highlights concerns about global demand, particularly in Asia, where crude imports have declined 200,000 bpd in the first 10 months of the year.
Key Events to Watch
Monday’s market movers will be influenced by several key events, including:
- ECB President Christine Lagarde and ECB Board Member Piero Cipollone’s participation in the Eurogroup meeting
- Appearances by ECB members Elizabeth McCaul, Frank Elderson, Christodoulos Patsalides, and Claudia Buch
- Final EZ manufacturing PMIs for October
- U.S. durable goods and factory orders for September
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