Defensive positioning has largely dominated the currency market this week, and with the exception of an inflation-boosted Australian Dollar (AUD). The US Dollar (USD) is trading firmly against all of G10, FX strategist Francesco Pesole at ING notes.  

US PCE and Biden-Trump debate shape the FX landscape

“In the emerging markets space, heavy jitters in carry MXN, BRL and ZAR are taking the biggest hit. On the contrary, a weaker Yen remains the biggest story in FX. Japanese authorities may let USD/JPY rise further before intervening, which can offer broader support to the Greenback into tomorrow’s core PCE event.”

“Today’s US calendar includes the hardly market-moving third release of first quarter GDP and PCE, while some focus will be on May durable goods orders (which are expected to decline) and jobless claims. Despite an expected contraction in initial claims last week, the surprise stickiness in continuing claims is a trend to watch.”

“The USD may stay generally supported today. We’ll be very interested to see if and how the USD reacts to tonight’s first TV debate between President Joe Biden and Donald Trump (02:00 BST). Our baseline assumption is that Trump is the most dollar-positive candidate due to protectionism pledges, geopolitical stance and plans for lower taxes.”