North American FX Open - The search starts for Biden's Democratic Party replacement

The US political landscape continues to evolve, after the announcement yesterday from President Biden that he will no longer run for re-election in November. Biden declared that his exit from the race was in the best interests of the party and the country. It ends a period of uncertainty, following the disastrous performance by Biden in the TV debate against former President Trump. The focus is now firmly on the Democrats, with BBC News reporting a growing number of senior Democrats are backing V-P Kamala Harris to be the party's presidential candidate. Her supporters include Gavin Newsom and Pete Buttigieg, who themselves were touted as possible nominees. Biden himself has endorsed Harris, who says she intends to 'earn and win' the nomination. Biden will remain as president for now, but the Republican nominee, Donald Trump, says "if he can't run for office, he can't run our country".

Overnight, against overall expectations, the PBOC cut their 1 and 5-year loan prime rates by 10BPs each to 3.35% and 3.85% respectively, a first easing in almost a year, stepping up support for the economy after growth disappointed and steering a shift toward a new policy benchmark. Meanwhile, Bbg reported that President Xi Jinping has unveiled sweeping plans to bolster the finances of China's indebted local governments, as the ruling Communist Party announced its long-term blueprint for the world s second-largest economy.

Over the weekend, the ECB's Makhlouf stated that there is no rush to make a decision on rates and that strong services inflation needs to be closely monitored. Overnight, the ECB's Kazimir admitted that the door remains open to additional easing and that he is waiting for a September data health check. Kazimir added that bets on two more ECB rate cuts this year are not totally misplaced, but are not the ECB's baseline scenario.

In the UK, The Times writes Rachel Reeves is preparing to hand millions of public sector workers an above-inflation pay rise and attempt to blame the Conservatives for any tax rises needed to fund it. The chancellor is understood to be minded to accept recommendations for a 5.5% pay rise for teachers, nurses and other NHS workers, with similar deals in prospect for other public sector staff.

In early trade so far this week, Usd/Jpy has been the subject of renewed selling, as has Aud/Usd despite the PBOC prime rate loan rate cuts.

A quiet day lies ahead with just the Chicago Fed National Activity Index for June due for release.

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