The final countdown for the U.S. presidential election begins this week, with the dollar experiencing a nearly 0.4% drop during Asian trading hours, giving back most of last Friday's gains. The dollar index is currently down 0.42%, at 103.88. Amid a generally stronger environment for non-dollar currencies, the Euro/Dollar rose 0.4% to $1.0876, facing resistance near $1.0905; the Dollar/Yen fell 0.6% to 152.00 yen. Analysts note that market sentiment is tense, as support rates between the two-party candidates—Democrat Harris and Republican Trump—are close, keeping the market highly focused on the election results and their possible impact on the global economy.
A recent closely-watched poll shows Harris leading Trump by 3 percentage points in the key state of Iowa, quickly affecting the market. Harris is broadly supported by female voters, causing concern among some investors that if she wins, the dollar may fall further. Conversely, if Trump is re-elected, his tough policies on immigration, tax cuts, and tariffs could benefit the dollar and push up bond yields. However, even if Trump is elected, analysts believe the market has already priced this in, and unless he controls Congress as well, the short-term support for the dollar might be limited.
Apart from the election tension, the Fed's interest rate policy is another major focus of the market this week. Interest rate futures suggest a nearly 99% chance that the Fed will cut rates by 25 basis points to 4.50%-4.75% on Thursday, with an 83% probability of another cut in December. The weak employment data released last Friday showed non-farm job additions of only 12,000, far below expectations. Analysts point out that this result was mainly dragged down by temporary layoffs caused by the Boeing strike and the hurricane. Although the unemployment rate remains at 4.1%, employment growth is still weak, with the average unemployment duration increasing from 20.6 weeks in September to 22.9 weeks, indicating insufficient economic growth potential.
As for other central banks globally, the Bank of England is expected to announce a 25 basis point rate cut at Thursday's meeting, while the Swedish Central Bank might cut rates by a significant 50 basis points, and Norway's Central Bank is expected to maintain current rates. Last week's fiscal budget announced by the British Labour government led to a sharp drop in British bonds and the pound, putting pressure on the Bank of England's policy choices. Today, the pound rebounded 0.36% in early Asian trading, at $1.2963, but still remains some distance from last week's low of $1.2841.
Technically, the dollar index's 5-day, 10-day, and 21-day moving averages are consolidating, momentum indicators show weakening momentum, and Bollinger bands are narrowing, presenting a neutral trend on the daily chart. Analysts say if the dollar index fails to hold the 21-day moving average support level of 103.63, it may further retreat to 102.91, giving back some gains from September and October. The Dollar/Yen might find buying support near the 200-day moving average support level of 151.57, but if this point is breached, more selling pressure could be triggered.
