As Friday unfolded, USD experienced a surge, gaining momentum and closing the week on a high note, setting the stage for a strong weekend.
While markets remained generally quiet JPY made some notable moves ahead of the weekend's elections.
Over the weekend, the Liberal Democratic Party (LDP) in Japan lost its majority in parliament for the first time since 2009. The political uncertainty has continued to plague JPY as markets speculate whether this will have an impact on the Bank of Japan's (BoJ’s) interest rate policy.
*Daily move - against G10 rates at 7:30am, 28.10.24
** Indicative rates - interbank rates at 7:30am, 28.10.24
It's shaping up to be a very busy week ahead, so let's get straight into it.
In the US, it's jobs week. JOLTS, ADP and nonfarm payroll number reports are due. Also being released are the ISM manufacturing numbers for September, core PCE inflation numbers and first estimates of GDP for Q3.
So far USD has had a very strong month due to a combination of positioning ahead of next week's election as well as data suggesting that too many rate cuts had been priced in from the Fed. Should the data suggest that the Federal Reserve might skip a rate-cut meeting USD will likely make further gains.
In Europe, we have GDP estimates for Q3 coming out on Wednesday, followed by October’s CPI numbers on Thursday. Soft numbers here could easily boost odds of a 50bps rate cut in December and make negative EUR moves more likely.
In the UK all eyes are on the Autumn budget coming out on Wednesday. The new Labour government is expected to announce sweeping tax rises in order to fund the government's increased day-to-day spending. If the plans support the UK’s growth narrative and don’t alter the BoE’s rate policy, we would expect GBP to be supported. However, markets are very wary after the infamous mini budget and anything that might cause a loss of confidence could have large downside risks for GBP.
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