Joe Biden announced he would not be seeking re-election, sharpening focus on the US dollar.
Joe Biden officially dropped his re-election bid on Sunday, bowing to mounting pressure from within the Democratic party in the wake of the president’s shambolic debate performance.
While hardly a shock, Biden’s decision increases uncertainty looking ahead to the election in November. Will the Democrats opt to put his understudy Kamala Harris on the ticket, or instead pivot elsewhere, such as to California governor Gavin Newsom? Whatever the decision, the US dollar could be in for some serious volatility this week.
Vice President Harris is currently the favourite to face off against Donald Trump. She would certainly bring some welcome energy to the campaign trail, but it would be far from a slam dunk. Harris is polling better than Biden in swing states like Pennsylvania and Virginia, but is still a point a or two behind on national vote share. The election could not be more finely poised.
Over in Europe, the pound finally fell back to earth on Friday on the back of disappointing retail data. GBP/EUR and GBP/USD each shed around half a cent, compounding losses sterling took the day before as pay growth slowed.
Over the course of last week, the pound ranged by over a cent against both the euro and the US dollar. It just goes to show how hard it is to try and play markets at their own game.
New UK chancellor Rachel Reeves already has a to-do list stretching half a mile. News that retail sales turned negative and that government net borrowing fell by less than forecast in June would have been an unpleasant reminder of the scale of her task.
Many of the key cogs in the global economic machine were hit by a massive tech outage last Friday. Across the world, planes were grounded, trains were cancelled and even some GP surgeries in the UK struggled to function. The glitch was blamed on a defect in cybersecurity firm Crowdstrike’s Windows update.
Here’s what to look out for this week…
It’s a notably quiet start to proceedings on the macroeconomic front. Despite the shortage of data, markets will surely find plenty to keep them busy in the US election and predictions for global interest rate cuts.
Some much needed impetus arrives on Wednesday in the shape of German HCOB Manufacturing PMI for July along with S&P Global’s UK services and manufacturing survey.
The German Ifo business climate index features on Thursday morning before attention turns to the US. Not only does the afternoon session feature durable goods orders, it also sees the preliminary measure of US GDP in the second quarter of 2024.
The Federal Reserve will be looking keenly ahead to Friday for core PCE price rises. It’s a fairly well known secret that Jerome Powell and co favour this metric in measuring inflation, so don’t be surprised if the data results in significant volatility for the US dollar, one way or the other.
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GBP: Good while it lasted
Much like the rest of the country, the pound enjoyed a mini heatwave last week, rising to its highest levels of 2024 against the euro and the US dollar. By Friday though, the ice cream had melted, which meant sterling finished the week broadly where it began against its main rivals.
GBP/USD: the past year
EUR: Summer mood
European Central Bank (ECB) president Christine Lagarde refused to be tied down to a date for the next rate cut. Given that the ECB’s next meeting isn’t until early September, Lagarde and her colleagues are likely buying some space to see how things look when they return from their August breaks.
GBP/EUR: the past year
USD: Speculation builds
The US dollar pared back some of its losses against the pound on Friday, but the Federal Reserve have failed to evade growing speculation that it will cut interest rates in September. This could be a key week in determining that decision, with a number of the Fed’s favourite metrics hitting screens in quick succession.
EUR/USD: the past year
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