Elections Impact

The US Dollar is trading a little lower today on the back of the first presidential elections debate between Trump and Harris last night. While the event was in no way as clear-cut as the meeting between Trump and Biden, post-debate polls tend to show Harris having won, leaning on USD somewhat. A Trump victory has been linked to a stronger Dollar through Trump’s protectionist and pro-growth policies while Harris is seen as maintaining the status-quo. For now, traders will wait to see whether the two candidates agree to another debate ahead of the November vote.

US CPI Up Next

Looking ahead today, focus now shifts to the headline event of the week: US inflation. Currently pricing for a larger .5% cut this month is sitting around the 35% mark. The consensus is for a 2.6% annualised reading, down from 2.9% prior. If confirmed, this should keep easing expectations well supported, keeping USD from breaking higher.  If we see today’s data undershoot forecasts this would likely see pricing for a deeper cut rise, leading USD firmly lower.  On the other hand, if the data show inflation remained sticky around prior levels, or rose last month, this would firmly dilute expectations for a deeper cut, fuelling a short covering rallying in USD. The extent to which USD rallies in this scenario may, however, be limited by the lower expectations of a Trump win on the back of last night’s debate.

Technical Views

DXY

For now, the index remains underpinned by the 100.93 level support. However, momentum studies are weakening, and risks of a fresh drop lower are growing, with 99.67 the next bear target below current support. Topside, bulls need to get back above 102.46 and the broken bull trend line to alleviate near-term bearishness.