FUNDAMENTAL REVIEW FOR THE WEEK (4 - 8 November 2024)

The current week may be one of the key weeks of this calendar year. There will be two significant events on the financial markets, and they will take place almost simultaneously - the degree of volatility may rise and fall more than once. What is the news that investors are eagerly awaiting?

It is quite difficult to miss them - both events are highlighted in the calendar at the highest level of importance - these are the US elections on November 5 and the Fed meeting on November 7. These are the casus factors that will determine the dynamics of political and economic decisions in the country, affecting the currency market, inflation and rates. Harris' victory may cause the dollar to fall and the stock market to rise, but possible protests by Trump supporters may postpone this "market positivity" (ending the period of uncertainty) for a while. Only when all the hype dies down will the markets remember that the Fed is turning on its printing press and starting to lower rates and go back to buying up all the American securities that are "lying around badly".

If Trump wins, his trade and tax policies will depend on Congress, and without its support, the implementation of the promised measures will be complicated. At the same time, Trump will strive for low rates, maintaining pressure on the Fed in order to maximally stimulate the construction industry, which is his strong point. An important point for Donald is whether he will gain control of the US Congress. Without control over Congress, Trump's attention may switch to geopolitical issues. Which will reduce the potentially faster onset of minimum rates from the regulator.

Against this background, the meeting of the American "Central Bank" on November 7 fades a little, but it is still not worth writing off. The Fed is likely to cut the rate by 0.25% at the November meeting due to slowing inflation and a weakening labor market. However, the dynamics depend on the election results, since a Trump victory could lead to a tougher confrontation between him and Fed Chairman Powell, which could exacerbate market volatility and increase the pace of rate cuts.

Significant events are also expected in other markets. The Bank of England, like the Fed, is also likely to cut rates at its meeting on Thursday amid rising government bond yields. It will also be important to see how the votes of the British regulator's board members for maintaining/cutting rates compare.