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The US dollar lost 0.4% and 0.25% against the pound and euro yesterday, respectively.
All eyes were on the US dollar yesterday after the weekend’s dose of political drama. Following some early weakness, the US dollar fought back against the pound and the euro, ending the European session at around parity against those two currencies.
Markets reacted to Joe Biden’s withdrawal from the presidential race with caution, which meant major swings in value were parked, for now at least. However, the latter part of this week is packed with crunch US data releases, so more volatility could well be around the corner.
A day light on data was filled up by speculation over who the Democrats would select in Biden’s stead. Vice President Kamala Harris remained the bookmakers’ favourite, having received endorsements from the president and over key figures in the party. Harris will benefit from the substantial war chest that Biden had amassed, although she faces an uphill battle to defeat Trump in several key states.
Overnight, Harris officially secured the support of enough delegates (the US has a complicated system for nominations, which we won’t get into here) to become the Democratic nominee. That should be enough for her to formally be announced at the convention next month, although delegates are allowed to change their minds.
The action was not just limited to US politics, however. Determined not to be outdone, Keir Starmer yesterday unveiled plans to cut the UK’s reliance on foreign workers with skills training. The prime minster also sought to head off of a brewing Labour rebellion over the two child benefit cap.
Risk appetite in major markets saw a gentle improvement yesterday, which helped push the price of gold down to its lowest in ten days.
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GBP: Treading water
The pound started the week with a low-key performance against its main rivals. Sterling was little changed over the course of Monday and this week’s light macro schedule means movements are more likely to come from elsewhere than from home.
GBP/USD: the past year
EUR: Reasonable expectations
The European Central Bank’s (ECB) Francois Villeroy de Galhau used an interview on French radio to say market expectations of two further interest rate cuts this year were ‘reasonable’. The euro continues to struggle with the expectation that the ECB will cut rates more aggressively than the Bank of England or the Federal Reserve.
GBP/EUR: the past year
USD: Time for some data
US markets spent the majority of yesterday reconsidering their assumption that Donald Trump would win the upcoming election. Wednesday provides a welcome reintroducing to data, before Thursday and Friday ramp things up even further.
EUR/USD: the past year
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