US Dollar Weakens As President Biden Decides Against Re-election, Says Saxo Bank MENA

According to a report by Saxo Bank, MENA, the US dollar began the week on a weaker note after President Biden decided not to run for re-election. This decision erased some of the previous week's gains, which were driven by increasing odds of Trump's re-election. Early Asian trading saw the Mexican peso leading gains against the US dollar, with the Korean won also strengthening. The Chinese yuan initially gained but then lost ground after China's central bank unexpectedly cut its short-term interest rate to stimulate the economy.

Brent crude futures fell by 2.9% $82.63, while WTI crude futures dropped by 3.2% to $80.13 on Friday, marking a second consecutive week of losses. Market sentiment was influenced by renewed optimism for a ceasefire in Gaza, as U.S. Secretary of State Antony Blinken hinted at a potential truce between Israel and Hamas. Gold prices decreased by 1.8% to $2,400, and silver prices fell by 2% to $29.22 due to a stronger dollar and profit-taking after gold's recent all-time high.

Risk-on currencies like the Kiwi dollar and sterling outperformed safe havens such as the Swiss franc and Japanese yen. The shift in currency performance reflects changes in investor sentiment amid evolving political developments in the US.

Equity Market Performance

U.S. stocks continued their downward trend for the second session in a row on Friday. The S&P 500 and Nasdaq declined by 0.7% and 0.8%, respectively, as investors took profits following recent record highs in major indices. A global IT outage allegedly caused by an update from CrowdStrike, which saw its shares fall by 11.1%, affected Microsoft's Windows, which declined by 0.7%, adding to market unease.

On the earnings front, Netflix dropped 1.5% despite positive earnings and revenue reports, while American Express fell by 2.7% even after reporting better-than-expected second-quarter profits. For the week, the S&P 500 slipped by 2.3%, marking its worst week since April, and the Nasdaq fell by 4.2%, ending a six-week winning streak due to a shift towards small caps amid expectations of Fed interest rate cuts and concerns about U.S.-China trade restrictions.

Treasury Yields and Bond Markets

Treasury yields closed near their weekly highs on Friday amid low trading volumes and sparse market catalysts due to a global IT outage that disrupted financial activities. European bond markets, particularly gilts, experienced steeper declines, putting early pressure on Treasuries.

This pressure was further exacerbated by a sizeable block trade in 2-year note futures. The 10-year US Treasury yield settled around 4.24%, climbing 3.5 basis points for the day and standing near its weekly peak.

Treasury debt futures indicate a bull-flattening of the US yield curve at the open, spurred by President Joe Biden's announcement to forgo a re-election campaign.

In China, one- and five-year loan prime rates are expected to remain unchanged later Monday as the central bank overlooks tepid second-quarter growth.

Futures of 2-year notes remained steady at 102 15/32, while 10-year debt edged higher to 110 7/8.

The decline in commodity prices was partly due to expectations of U.S interest rate cuts in September.

The overall market sentiment was swayed by renewed optimism for a ceasefire in Gaza as U.S Secretary of State Antony Blinken suggested that a long-sought truce between Israel and Hamas was nearing fruition.