While Republican challenger Donald Trump – now clear favorite in betting markets for a return to the White House – took the stage overnight at his party’s convention, pressure on President Joe Biden to step aside reached a crescendo and press reports suggest he may announce a withdrawal over the weekend.
Perhaps hedging bets on who may replace Biden, bookmakers reduced the chances of a Trump win to about 60% from more than 70% on Monday after last weekend’s assassination attempt on the former President.
Interest rate markets were edgier too, with 10-year U.S. Treasury yields pushing higher despite news of a sharp jump in weekly jobless claims on Thursday.
While futures are still baking in the first Federal Reserve interest rate cut for September, the dollar bounced back from its week’s lows.
The euro retreated following Thursday’s expected decision from the European Central Bank to leave its policy rates unchanged – with markets now expecting a second cut of the year in September but having doubts about the trajectory after that.
Sterling fell back to $1.29 after a poor UK retail sales reading for June.
Japan’s yen and China’s yuan both slipped too, with the former knocked back by sub-forecast Japanese inflation readings that cast some doubt on Bank of Japan tightening.
Japan’s government also cut this year’s growth forecast on Friday as consumption took a hit from rising import costs due to a weak yen.
Mexico’s peso nursed sharp losses from the prior session.
China’s mainland stocks held the line again, however, and ended the week higher with a seven-session winning streak after the four-day government leadership gathering concluded on Thursday. Hong Kong shares, however, were closer to the global mood and lost 2% on Friday.
Due to its lack of detail, Chinese officials acknowledged on Friday that the sweeping list of economic goals re-emphasised at the end of the key Communist Party meeting contained “many complex contradictions”, pointing to a bumpy road ahead for policy.
More concrete measures may emerge next week.