This week promises to be pivotal for global financial markets, as traders brace for central bank policy decisions from the Federal Reserve, Bank of England, and Reserve Bank of Australia all of which could significantly impact the global economic landscape. Simultaneously, oil prices are trending higher as OPEC+ delays a scheduled output increase, while geopolitical tensions involving Iran have amplified concerns over supply disruptions. Meanwhile, the U.S. presidential election adds an extra layer of volatility, further influencing risk sentiment across asset classes.
The dollar experienced a sharp pullback, its biggest in over two months, after a recalibration of investor expectations around the election outcome. The latest polls have cast doubt on Donald Trump’s reelection odds, with data showing no clear lead. As a result, the U.S. currency weakened against key peers, including the yen, euro, and Australian dollar, while Treasury futures saw a rise. This shift comes amid a recent rally in the dollar and 10-year Treasury yields to levels not seen since July, fueled by prior market confidence in a second Trump term. Trump’s stance on looser fiscal policies and aggressive tariffs has driven concerns that his policies could deepen the federal deficit and stoke inflation, posing risks to Treasury prices.
In addition, an influential Des Moines Register poll showed Kamala Harris leading Trump in Iowa a state he carried in previous elections with a narrow 47%-44% advantage, rattling one of the core assumptions underpinning the so-called “Trump trade.” This strategy, widely favored by investors in recent years, hinges on expectations for higher Treasury yields and a firmer dollar on the back of Trump’s fiscal expansion.
Beyond the election, oil markets are also in focus, with prices advancing as OPEC+ announced a delay in its planned output increase. Concerns are further intensified by escalating rhetoric from Iran, which has amplified worries about potential supply shocks in a market already grappling with mixed demand signals amid the global economic recovery. As OPEC+ navigates these uncertainties, the decision to defer additional supply may provide a crucial backstop for prices, especially if geopolitical tensions continue to simmer.
With the Fed, BOE, and RBA each likely to provide fresh economic projections, markets are keenly attuned to any signals on rate paths and monetary support. Investors will parse central bank language for indications of policy shifts amid a backdrop of election-driven volatility and lingering economic uncertainties.