The U.S. dollar experienced a notable decline as investors reevaluated their expectations of a Donald Trump victory in the presidential election, following new polling data indicating a lack of clear advantage for the former president. In contrast, oil prices increased after OPEC+ announced a delay in output hikes. The dollar index fell the most in over six weeks, with the currency slipping against key counterparts such as the yen and the Australian dollar. Treasury futures saw a corresponding rise.
This market shift coincided with a Des Moines Register poll showing Kamala Harris leading Trump 47% to 44% in Iowa, a state he has previously secured in both of his elections. While the so-called “Trump trade” typically favors higher Treasury yields and a stronger dollar, other polls suggest that the race remains extremely close, with voters divided both nationally and in crucial swing states.
In recent weeks, both the dollar index and 10-year Treasury yields had climbed to their highest levels since July, as investors increased their bets on Trump’s re-election. Concerns persist regarding Trump’s advocacy for more expansive fiscal policies and significant tariffs, which could exacerbate the federal deficit and inflation, thereby impacting Treasury values.
Asian shares saw gains, led primarily by stocks in South Korea and Australia, while U.S. stock futures inched upward following Wall Street’s positive performance on Friday, bolstered by strong earnings reports from companies such as Amazon.com and Intel Corp. Japanese markets were closed for a holiday, resulting in no Treasury trading during Asian hours.
“It’s essentially impossible to predict the outcome at this stage,” remarked Homin Lee, a senior macro strategist at Lombard Odier in Singapore, during an interview with Bloomberg TV. He advised that the best strategy is to “wait for the event to unfold and then make informed decisions based on momentum.”
In addition to the U.S. election, this week’s financial market activity will be influenced by central bank interest rate decisions in the U.S., U.K., and Australia, among other countries.
The Federal Reserve is anticipated to cut rates by 25 basis points on Thursday, following the release of recent jobs data that indicated the slowest hiring pace since 2020, although the unemployment rate remains low. The jobs figures were significantly affected by severe hurricanes and a major strike.
In Australia, Westpac Banking Corp. announced an increase in its share buyback program to A$2 billion (approximately $1.3 billion) and reported profits that exceeded analysts’ expectations, although its shares dipped slightly in response.
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