United States of America

USD is weakening against EUR and JPY but has ambiguous dynamics against GBP.

Investors are preparing for tomorrow’s US presidential election and the US Fed’s interest rate decision on Thursday. According to experts, both candidates have approximately equal chances of winning, confirmed by social surveys and betting platform data. The Polymarket service estimates the probability of Republican candidate Donald Trump coming to power at 56.1%, and the online betting operator PredictIT preferers the representative of the Democratic Party, Kamala Harris, so the unpredictability of the results of the electoral event may cause market instability soon. Harris’s economic program does not imply drastic changes: the fight against rising prices, and the monetary policy easing will continue. Trump intends to resume trade wars by imposing significant tariffs on imported goods. On the one hand, it will lead to an increase in profits for domestic producers, and on the other increase in inflation and borrowing costs. Meanwhile, at the next meeting of the US Fed, an interest rate adjustment of –25 basis points may follow since officials will not consider the October data from the labor market since the slowdown in employment was caused by temporary factors, while unemployment remained at the same level, and wages rose.

Eurozone

EUR is strengthening against USD and GBP but has ambiguous dynamics against JPY.

In September, the EU manufacturing PMI increased from 45.0 points to 46.0 points, exceeding the forecast of 45.9 points, and in the largest EU economy, Germany, the manufacturing PMI grew from 40.6 points to 43.0 points instead of 42.6 points. Overall, the industry has been slowing for 28 months, although not as quickly as before. In November, the investor confidence indicator increased from –13.8 points to –12.8 points, improving for the second month. However, experts note that the likelihood of a recession in Germany remains. The October employment index from the Institute for Economic Research (IFO) fell from 94.0 points to 93.7 points, the lowest since July 2020.

United Kingdom

GBP is weakening against EUR and JPY but has ambiguous dynamics against USD.

On Thursday, the Bank of England will meet. Its results have become less predictable after the presentation of the state budget by the Labor government. Previously, experts expected an adjustment in the interest rate by –25 basis points from 5.00% to 4.75%. Now, they note that a significant increase in spending could cause a new rise in inflation, requiring the regulator to maintain a tight monetary policy for a long time. Most analysts are inclined to believe that after the reduction in borrowing costs in November, the department’s officials will take a break to assess the results of the measures taken.

Japan

JPY is strengthening against USD and GBP but has ambiguous dynamics against EUR.

According to a survey of Japanese citizens conducted by Loyalty Marketing Inc., most will not save their winter bonuses this year. Only 33.5% of respondents intend to put aside savings, while the rest note the lack of excess finances, which confirms the increasing pressure of high inflation on households. Thus, Bank of Japan officials may return to tightening monetary policy. However, most experts are confident that the regulator will not take new steps until early next year.

Australia

AUD is strengthening against EUR and JPY but has ambiguous dynamics against USD and GBP.

Investors are gearing up for tomorrow’s meeting of the Reserve Bank of Australia (RBA): officials are expected to keep the interest rate at 4.35%, and in an accompanying statement they will emphasize the need for high borrowing costs in the context of significant growth in consumer prices. Moreover, most experts are confident that monetary policy will remain unchanged until at least February since inflation is far from the target range of 2.0–3.0%.

Oil

Oil prices recover after the decision of the OPEC participants to postpone plans to increase production by a month and maintain production restrictions at 2.2M barrels per day in November, and to increase it by 180K barrels per day in December.

However, the time of entry into force of the new limits may be postponed again if necessary. Additional support for oil prices is provided by the possibility of new Iranian attacks on Israeli territory, which was recently reported by the media. In this case, the possibility of interruptions in the supply of raw materials from the region will increase significantly, increasing the risk premium.