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By Tom Wilson and Rae Wee
LONDON/SINGAPORE (Reuters) – The dollar fell and shares struggled on Monday as investors cautiously anticipated a U.S. presidential election that would have major implications for the global economy, including a U.S. Federal Reserve interest rate cut later in the week expected.
In the US presidential race, Democratic candidate Kamala Harris and Republican candidate Donald Trump remain virtually tied in opinion polls ahead of Tuesday’s vote. It may not be clear who won for days after voting ends.
Trump’s policies on immigration, tax cuts and tariffs could put upward pressure on inflation, bond yields and the dollar, according to analysts, while Harris is seen as the continuity candidate.
The dollar index, which measures the greenback against a basket of currencies, fell 0.3% to 103.63.
The dollar fell against a host of European and Asian currencies, losing 0.6% against the euro to $1,090. It also traded down 0.6% against the Japanese yen to 152.11 and 0.5% against the Chinese yuan in the domestic market.
The dollar’s decline may be related to a poll that showed Harris taking a surprising three-point lead in Iowa, thanks in large part to her popularity among female voters, dealers said.
European shares were flat in early trading, with UK shares the outlier, up 0.4%.
Wall Street was headed for small gains, with Nasdaq futures up 0.2% and S&P 500 futures up 0.1%.
“Tomorrow will determine the direction of the global economy and geopolitics for the next four years,” Deutsche Bank analysts wrote.
They warned that “a high degree of uncertainty remains about both the outcome, including the very tight race in the House of Representatives, and when we will know it.”
US Treasuries rose, with 10-year Treasury yields falling 5.6 basis points to 4.30%.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%, recovering from a slide to a five-week low on Friday.
PRICES FOCUS
The week will also provide investors with catalysts for global monetary policy. Of a range of interest rate decisions, the Fed is the most closely watched, while decisions are also coming from the Bank of England (BoE), the Reserve Bank of Australia (RBA), Riksbank and Norges Bank.
Markets are leaning towards a 25 basis point Fed rate cut.
“Based on current data, we see no reason for (the FOMC) to rush into rate cuts,” ANZ analysts said.
“The elections and uncertainty about the future fiscal path also support arguments for caution in recalibrating monetary policy.”
This week’s meeting of China’s powerful Standing Committee of the National People’s Congress (NPC) is also at the top of investors’ radar.
The NPC will meet from November 4 to 8, focusing on possible further details of a series of stimulus measures recently announced.
Chinese blue chip shares rose 1.4%, while the Shanghai Composite Index rose 1.2%.
Reuters reported that at the NPC meeting, China is considering approving the issuance of more than 10 trillion yuan ($1.4 trillion) in additional debt over the coming years to revive its fragile economy, a budget package expected to continue will be strengthened if Trump wins the election. election.
The Bank of England, which meets on Thursday, is also expected to cut rates by 25 basis points. His decision was complicated by a sell-off in government bonds following the Labor government’s budget last week.
Sterling added 0.5% higher to $1.297, helped by a weaker dollar. Last week the price fell by 0.3%.
Oil prices rose after OPEC+ announced on Sunday that it would postpone its planned production increase in December by a month. Brent futures rose 1.8% to $74.41. U.S. West Texas Intermediate (WTI) crude rose 1.9% to $70.83. (OR)
(Reporting by Tom Wilson in London and Rae Wee in Singapore; Editing by Shri Navaratnam and Hugh Lawson)