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Globex has opened for trade, brought to you by the CME!

The big news markets are responding to is the withdrawal of US President Biden from the 2024 presidential election. Justin was all over the weekend news as it happened!

• It’s finally Joever

The USD is little changed, EUR/USD is circa 1.0886 and USD/JPY circa 157.42.

Emini equity index futures are up a little, a small gap higher. 5 Points or so. Not a big response.

This article was written by Eamonn Sheridan at www.forexlive.com.

The trade for the days ahead looks to be some unwinding of the ‘Trump trade’ we saw since Biden performed poorly in the debate a couple of weeks ago.

When the prospect of a Trump second term rose traders and investors focused on:

• the likely increase in US debt, fiscal and inflationary pressures
• stocks benefitting from Trump tax cut policies that were seen as lifting corporate profits still further

US President Joe Biden’s exit from
the presidential race on Sunday could prompt investors to unwind some of these trades. Indeed, US stocks already began discounting this with the dip last week.

The Democrat nomination is not yet decided, at this stage it looks like Harris vs. Trump, but until the Dem nomination its not a lock.

This article was written by Eamonn Sheridan at www.forexlive.com.

I posted the bleary-eyed super-early rates here:

• Monday morning open levels, indicative FX rates 22July2024, little change from late Friday

Just updating now after the huge political news on Sunday from the US, Biden has dropped out of the presidential election:

• It’s finally Joever

Its still very early here in Asia,

• just before 7 am in Sydnay
• just before 6 am in Tokyo
• And just before 5 am in Hong Kong and Singapore

NZ is just heading towards 9am

Indicative rates:

• EUR/USD 1.0887
• USD/JPY 157.44
• GBP/USD 1.2921
• USD/CHF 0.9121
• USD/CAD 1.3721
• AUD/USD 0.6690
• NZD/USD 0.6011

The latest from the US is that Vice President Kamala Harris could be moving forward on the path to the Democratic presidential nomination following President Biden’s endorsement after dropping out of the race. Its not a lock.

This article was written by Eamonn Sheridan at www.forexlive.com.

The People’s Bank of China announces the 1- and 5-year loan prime rates on Monday, 22 July 2024. The announcement is usually on the 20th, but since that was on Saturday it’ll be today instead.

Last week we had the monthly Medium-term Lending Facility (MLF) setting:

• The PBoC has kept the 1-year MLF interest rate unchanged at 2.5%, as expected

When the People’s Bank of China leaves the MLF rate unchanged its often, but not always, a signal that LPRs will remain unchanged.

Current LPR rates are:

• 3.45% for the one year
• 3.95% for the five year

The PBOC’s Loan Prime Rate (LPR):

• An interest rate benchmark used in China, set by the People’s Bank of China each month.
• The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.
• Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
• LPRs are calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
  • The panel consists of both domestic and foreign banks, with different weights assigned to each bank’s contributions based on their size and importance in the Chinese financial system.
  • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.

• This snapshot from the ForexLive economic data calendar, access it here.
• The times in the left-most column are GMT.
• The numbers in the right-most column are the ‘prior’ (previous month/quarter as the case may be) result. The number in the column next to that, where there is a number, is the consensus median expected.

This article was written by Eamonn Sheridan at www.forexlive.com.

Good morning, afternoon and evening all. Any charts, technical analysis, trade ideas, thoughts, views, ForexLive traders would like to share and discuss with fellow ForexLive traders, please do so:

This article was written by Eamonn Sheridan at www.forexlive.com.

Justin was lightning fast with the breaking news on Sunday afternoon US time:

• It’s finally Joever

Major FX rates are little changed on the political news, minor wiggles for major FX only. As is usual for a Monday morning, market liquidity is very thin until it improves as more Asian centres come online … prices are liable to swing around, so take care out there.

Indicative rates:

• EUR/USD 1.0887
• USD/JPY 157.43
• GBP/USD 1.2913
• USD/CHF 0.8879
• USD/CAD 1.3720
• AUD/USD 0.6689
• NZD/USD 0.6015

This article was written by Eamonn Sheridan at www.forexlive.com.

The decision has been coming for a few weeks already and Biden has now made it official. There was a sense that he could’ve stuck in there until the Democratic National Convention in August. But alas, the sense of realism has finally taken over Biden and his camp. This was his statement on Twitter/X:

“My Fellow Americans,

Over the past three and a half years, we have made great progress as a Nation.

Today, America has the strongest economy in the world. We’ve made historic investments in rebuilding our Nation, in lowering prescription drug costs for seniors, and in expanding affordable health care to a record number of Americans. We’ve provided critically needed care to a million veterans exposed to toxic substances. Passed the first gun safety law in 30 years. Appointed the first African American woman to the Supreme Court. And passed the most significant climate legislation in the history of the world. America has never been better positioned to lead than we are today.

I know none of this could have been done without you, the American people. Together, we overcame a once in a century pandemic and the worst economic crisis since the Great Depression. We’ve protected and preserved our Democracy. And we’ve revitalized and strengthened our alliances around the world.

It has been the greatest honor of my life to serve as your President. And while it has been my intention to seek reelection, I believe it is in the best interest of my party and the country for me to stand down and to focus solely on fulfilling my duties as President for the remainder of my term.

I will speak to the Nation later this week in more detail about my decision.

For now, let me express my deepest gratitude to all those who have worked so hard to see me reelected. I want to thank Vice President Kamala Harris for being an extraordinary partner in all we’ve done. And to the American people for the great faith they have placed in me.

I believe today what I always have: that there is nothing America can’t do – when we do it together. We just have to remember we are the United States of America.”

As he drops out, the betting markets have Kamala Harris as the favourite to take over from Biden to challenge Trump. But it might not be a straightforward case as Biden didn’t quite endorse Harris directly in his statement above. He will be speaking later on his decision to bow out of the race, so we’ll see if he will say anything else then.

Otherwise, we might have to wait until after the Democratic National Convention to have a better sense of who will be facing up against Trump come November.

Adam posted this earlier: How would the bond and FX markets react to Biden dropping out of the race?

Update: Biden has now come out to give an official endorsement for Harris, saying: “Today I want to offer my full support and endorsement for Kamala to be the nominee of our party this year.”

Other Democrats can still challenge Harris next month but with Biden’s endorsement, it’s going to be a tough one. In the bigger picture, Trump is still favourite to win the election. But at least it’s not a complete given now, though still a long shot for the Democrats.

This article was written by Justin Low at www.forexlive.com.

UPCOMING EVENTS:

• Monday: PBoC
  LPR.
• Wednesday: Japan/Australia/Eurozone/UK/US
  Flash PMIs, BoC Policy Decision.
• Thursday: US
  Durable Goods Orders, US Jobless Claims, US Q2 Advance GDP.
• Friday: Tokyo
  CPI, US PCE.

Monday

The PBoC is expected to keep the LPR rates
unchanged at 3.45% for the 1-year and 3.95% for the 5-year. The central bank
left the MLF rate unchanged at 2.50% last week and it’s generally a leading
indicator for the LPR decision.

As a reminder, the PBoC recently introduced
a new cash management mechanism and Governor Pan Gongsheng said that the
seven-day reverse repo rate “basically fulfils the function” of the
main policy rate. ING published a nice article on the new policy framework
reform here.

Wednesday

Wednesday will be the Flash PMIs Day for
many major economies with the Eurozone, UK and US PMIs being the main
highlights:

• Eurozone Manufacturing
  PMI: 46.3 expected vs. 45.8 prior.
• Eurozone Services PMI:
  53.0 expected vs. 52.8 prior.
• UK Manufacturing PMI: 51.1
  expected vs. 50.9 prior.
• UK Services PMI: 52.5
  expected vs. 52.1 prior.
• US Manufacturing PMI: 51.5
  expected vs. 51.6 prior.
• US Services PMI: 55.0
  expected vs. 55.3 prior.

The BoC is expected to cut interest rates
by 25 bps and bring the policy rate to 4.50%. Such expectations have been
influenced by another soft labour
market report and strengthened after the
last Canadian
CPI data where the underlying inflation
measures eased further. Including the July cut, the market expects 62 bps of
easing by year-end.

Thursday

The US Jobless Claims
continue to be one of the most important releases to follow every week as it’s
a timelier indicator on the state of the labour market.

Initial Claims remain
pretty much stable around cycle lows and inside the 200K-260K range created
since 2022. Continuing Claims, on the other hand, have been on a sustained rise
recently with the data printing new cycle highs every week.

This shows that layoffs are
not accelerating and remain at low levels while hiring is more subdued. This is
something to keep an eye on. This week Initial Claims are expected at 238K vs.
243K prior, while there’s no consensus for Continuing Claims at the time of
writing although the prior reading saw an increase from 1847K to 1867K.

Friday

The Tokyo Core CPI Y/Y is
expected at 2.2% vs. 2.1% prior. Inflation in Japan is basically at target and
there are no strong signals that point to a reacceleration. It’s hard to see a
rate hike given that Japan strived to achieve inflation for decades and it
might ruin this accomplishment by tightening policy too much.

Nonetheless, besides the
expectations of BoJ trimming its bond purchases by a “substantial” amount, the
market is also assigning a 60% probability of a 10 bps hike at the upcoming
meeting.

The US PCE Y/Y is expected
at 2.4% vs. 2.6% prior, while the M/M measure is seen at 0.1% vs. 0.0% prior.
The Core PCE Y/Y is expected at 2.5% vs. 2.6% prior, while the M/M reading is
seen at 0.1% vs. 0.1% prior. Forecasters can reliably estimate the PCE once the
CPI and PPI are out, so the market already knows what to expect.

This report won’t
change anything for the Fed as the central bank remains in a “wait and see” mode. The market has
already fully priced in a rate cut in September and one in December with some
chances of a back-to back cut in November. The Fed is expected to be more
dovish at the upcoming meeting but won’t deliver a rate cut nor pre-commit to
one.

The next CPI release will
be key (barring quick deterioration in the labour market) as another benign
report will likely see the Fed Chair Powell pre-committing to a rate cut in
September at the Jackson Hole Symposium.

This article was written by Giuseppe Dellamotta at www.forexlive.com.