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06/11/2024 - 08:29 UTCThe dollar is seen surging against most majors early on Wednesday, with the dollar index (USDX) up by almost 1.80% as Trump appears to be taking a clear lead in the U.S. presidential election as of 06:30 AM GMT time. According to mainstream media, regional networks declared Trump as taking the lead in key battleground states including Michigan, Wisconsin, Arizona and Pennsylvania. Voting in Nevada has not yet finished; however, Harris largely won the West Coast.
Furthermore, market participants are preparing for the Federal Reserve interest rate decision that will be announced on Thursday, where a 25bps reduction is expected. According to the CME Fedwatch tool, expectations for a cut of 25 basis points in the upcoming FOMC meeting later this week currently stand at 97.6% while odds for rates to remain unchanged are at 2.4%.
Wall Street appears to be reacting positively to Trump leading the presidential race, with the three main stock indices surging in Asia on Wednesday, as investors look forward to promised tax cuts and less corporate regulation. The US 500, the US tech 100 and the US 30, all climbed more than 1.5% since market opened.
European stocks on the other hand declined due to concerns that proposed tariff policies could escalate into a global trade war, negatively impacting EU exports.
In corporate news, Palantir Technologies had a significant 23% increase in its stock price, driven by earnings that beat expectations and the provision of an upbeat revenue forecast. Analysts highlighted that the company's US commercial business demonstrated robust year-over-year growth of 54%, surpassing the company's guided range of 47%+. This growth trajectory can be attributed to increased spending from enterprise customers on flagship products, with 104 deals surpassing the $1 million threshold.
Aside from the U.S. presidential elections and the Fed interest rate decision, other key events due later this week include the US jobless claims and UoM consumer sentiment and inflation expectations survey.
The EUR/USD gained momentum on Tuesday as the U.S. Dollar weakened across broader markets.
In Europe, economic data remains relatively sparse this week aside from an address by European Central Bank (ECB) President Christine Lagarde. Upcoming events include pan-EU Retail Sales figures due on Thursday and the conclusion of the EU leaders’ summit on Friday.
Early results indicate former President Trump performing strongly in rural areas, while Vice President Kamala Harris is seeing greater support in suburban regions compared to former President Biden. This shift has bolstered trades linked to Trump’s potential re-election, providing support for the U.S. Dollar (USD) against the Euro (EUR).
Equity markets, particularly tech sectors, appear to view Trump as a market-friendly option, despite his strong advocacy for tariffs on imported goods—a policy that could raise inflation concerns.
The Federal Reserve is also set to announce its interest rate decision on Thursday, where Fed Chair Jerome Powell is expected to implement a quarter-point rate cut, bringing the Federal Funds Rate down to 4.75%.
Gold prices climbed on Tuesday as U.S. voters headed to the polls in one of the tightest presidential races in recent history.
The Federal Reserve is set to announce a potential rate cut on Thursday, with expectations of a 25-basis-point reduction, bringing rates down to the 4.50%-4.75% range.
Meanwhile, recent U.S. economic data revealed a wider trade deficit for September. Additionally, October’s business activity data was mixed: S&P Global reported a decline in service sector activity, while the ISM Services PMI showed an improvement.
Oil prices rose about 1% on Tuesday as markets responded to a storm forecasted to disrupt U.S. Gulf of Mexico production, coupled with a weaker U.S. Dollar as Americans cast their votes in a tightly contested presidential race.
Energy companies in the Gulf of Mexico began evacuating workers in advance of Tropical Storm Rafael, which is predicted to intensify into a hurricane. The storm may cut U.S. oil output by an estimated 4 million barrels.
Despite recent gains, oil trading remains cautious as markets await key events, including the U.S. election, a Federal Reserve policy decision, and China’s National People’s Congress meeting.
U.S. stock index futures rose early on Wednesday as early results indicated Donald Trump pulling ahead of Kamala Harris in the 2024 presidential race. The Republicans are also poised for control of both the Senate and House, potentially setting the stage for swift policy changes if the trend holds.
The gains extended after a strong Tuesday session on Wall Street, where technology stocks rebounded from recent declines. Other sectors were bolstered by an unexpectedly strong Purchasing Managers Index (PMI) for October, signaling resilience in business activity.
The U.S. Dollar and Treasury yields surged on this news, with the dollar hitting a four-month high as markets anticipated more inflationary policies.
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