With the dollar on the back foot again, much of the action early on Thursday was in currency markets.
Buoyed by last week’s expected UK election landslide for the Labour Party and data showing the economy accelerated more than expected in May, sterling jumped to its highest level in four months.
The 0.4% GDP beat reinforced Wednesday’s speech by Bank of England chief economist Huw Pill, seen as a swing voter in the split BoE monetary policy council.
Pill dampened hopes for a summer UK rate cut by stressing services inflation and wage growth showed “uncomfortable strength”, and money markets now ascribe less than a 50% chance of first BoE rate cut next month.
But the euro was on the rise too – hitting its best level in more than a month as French markets calmed further following the indecisive election result there at the weekend.
France’s benchmark CAC40 stock index rose 0.6%, while the French 10-year government debt premium over Germany squeezed as low as 62 basis points for the first time in almost a month.
Bank of France head François Villeroy de Galhau said on Thursday he hoped the country’s political gridlock would be resolved by September, when the parliament of the euro zone’s second-largest economy must vote on the country’s budget.
Elsewhere, the focus was on fractious U.S. politics, with more pressure building on President Joe Biden to step aside ahead of November’s White House race.
Democratic party heavyweights Nancy Pelosi and George Clooney, who may influence other Democratic lawmakers and financial donors, and two Senate Democrats cast more doubt on Biden’s fitness to run.
Senate Majority Leader Chuck Schumer, meanwhile, has privately signaled he’s open to a Democratic candidate other than Biden, according to Axios. Schumer, however, reiterated his support for Biden in a statement following the Axios report.
With Republican challenger Donald Trump now far ahead in betting markets to win the race, the relative calm in U.S. markets was notable.
Even currency markets where Trump’s tariff and immigration pledges may hit hardest seemed steady. Mexico’s peso, Brazil’s real and China’s yuan were firmer on Thursday – the first two near their best levels in a month.
Oil prices were steady but the annual gain in crude fell below 10% for the first time in a month. Global oil demand growth will slow to just under a million barrels per day this year and next, the International Energy Agency said, as it said Chinese consumption contracted in the second quarter.
