Dollar makes ground as Trump win chatter gains traction

The dollar held firm on Monday as betting markets saw an increasing likelihood Donald Trump would win the US election.

Dollar makes ground as Trump win chatter gains traction

According to numbers from UK odds comparison platform OddsChecker, most bookies are pricing a roughly 60% chance of a Trump win. "Limited data out this week will keep ​markets focused on two risks: the US election and the upcoming jobs report," economists at Citi said. "With 15 days to go, polls continue to show a very close presidential election. Recent national polls have shifted slightly toward Trump with the Real Clear Politics spread between the two candidates in national polls now less than 1 percentage point. Most swing state polls show a statistical dead heat. Prediction markets have held steady after shifting toward implying a slight advantage for Trump earlier this month," said economists at Citi. The pound eased to USD1.3029 on Monday afternoon UK time, from USD1.3054 on Friday. The euro ebbed to USD1.0847 on Monday, from USD1.0862 on Friday. ING analysts commented: "FX markets seem to be positioning for a Trump victory in next month's US presidential election. October seems to have been a good month for Donald Trump in opinion polls and the dollar is bid across the board." Against the euro, sterling bought EUR1.2006, down from EUR1.2014. Consumer confidence across UK households improved this month amid a boost from easing inflation, according to new data, providing a boost to the government ahead of next week's budget. The S&P Global UK Consumer Sentiment Index survey moved closer towards the 37-month high it struck in July after a post-election bounce. The survey, which tracks consumer financial wellbeing, labour market conditions, household spending, saving and debt, recorded a reading of 47.3 for October. It represented an increase from 46.0 in September. Any reading above 50 is deemed to be positive, with a reading below that being in negative territory. A week on Wednesday, Chancellor Rachel Reeves will announce her first budget statement. Ahead of that, speculation is rife as to what the 'red box' will contain. On Sunday, a senior minister declined to rule out extending the freeze on income tax thresholds. Wes Streeting said he would not guess measures that the chancellor might introduce in the Budget on October 30, but told broadcasters on Sunday morning that he had already agreed health spending with Rachel Reeves. "If you're asking me whether I would vote against anything in the chancellor's budget? The answer is no, of course I'm not going to do that," the health secretary told Sunday Morning with Trevor Phillips on Sky News. Producer prices in Germany declined by more in September from August than anticipated, data published by the Federal Statistical Office showed. Producer prices declined by 0.5% monthly in September, after an increase of 0.2% in August from July. This was a quicker pace of monthly deflation than the 0.2% fall expected by FXStreet-cited market consensus. Versus its Canadian counterpart, the buck rose to CAD1.3822 from CAD1.3794. On Wednesday, the Bank of Canada is expected to lower interest rates, with some analysts expecting a jumbo-sized 50 basis points cut. Based on continued inflation progress and softer third quarter growth, Goldman Sachs said it expects that the BoC will "deliver a 50 basis points cut" before resuming a 25bp per-meeting pace until reaching a terminal rate of 2.5% in June 2025.

Analysts forecast a 50 bps cut

Citi agrees with Goldman, and forecasts a 50 bps cut as well. But Bank of America predicts a more modest 25bp reduction, but thinks the decision "a close call," given below forecast inflation. At its September meeting, the BoC trimmed its key policy rate by 25 basis points to 4.25%, its third successive cut. The bank had held its benchmark rate at a two-decade high of 5% for a year until June when it started the easing cycle. Versus the Swiss franc, the dollar declined slightly to CHF0.8643 on Friday from CHF0.8652. Against the Japanese yen, it climbed a touch to JPY149.93 from JPY149.87. Elsewhere, against the Australian dollar, the US currency advanced to AUD1.4962 from AUD1.4890. Reserve Bank of Australia Deputy Governor Andrew Hauser warned that interest rates won’t fall as much or as early as those of other central banks in part because inflation in Australia is still "too high." Hauser added that most RBA models show a neutral rate between 3% to 4%, suggesting the current policy rate of 4.35% is not significantly restrictive.