Markets are awaiting the European Central Bank's monetary policy decision. The ECB is forecast to lower interest rates for a second straight meeting as data shows slowing inflation is accompanied by a worsening economy. Overnight in Asia, stocks declined in Japan and South Korea, while they rose in Australia. Taiwan Semiconductor Manufacturing Co. reported net income for the third quarter that beat analysts' estimates, but the disappointing order numbers and cuts to its 2025 revenue forecast left a sour note.
Yesterday, Mr. Trump was back in the headlines, declaring that "tariff" is the most beautiful word in the dictionary! Donald is also determined that the USD should retain its position as the dominant reserve currency. This appears to be linked with his desire to address the US’s huge trade deficit. It now seems Trump is betting on tariffs to achieve this. Domestically produced goods are usually either more expensive or of inferior quality compared to the imports they replace. Tariffs, therefore, tend to be inflationary, which could lift the USD. For this reason, I expect this dollar rally to continue if Trump wins the presidency rather than Harris.
As for other markets, the Treasury 10-year yield climbed two basis points to 4.03%. Oil rose after four days of declines. Bitcoin fell after rising 1.7% on Wednesday, reaching its highest level since July, and spot gold rose 0.3% to $2,683.04 an ounce. Today is all about the ECB: the announcement is at 13:15, with the press conference at 13:45.
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