Early USD Moves Muted As Biden Drops Out of Presidential Race

The USD is down a touch in early dealing Monday dealings, but overall moves are muted at this stage. Most of the majors sit away earlier highs against the USD. This follows the Sunday news out of the US, where US President Biden has dropped out of the Presidential election race. He is endorsing Vice President Kamala Harris to run as the Democrat's candidate.

• The USD BBDXY index ended last week at the 1256.3 level, just off weekly highs but still sub pre CPI levels from the week prior. The majors sits a few pips higher against the USD at this stage, while NOK and SEK are outperforming at the margins, albeit with lighter liquidity in these pairs. AUD was last near 0.6685/90, NZD/USD close to 0.6015. USD/JPY nearly unchanged at 157.45. USD/MXN, a closely watched pair in terms of election risks is up slightly to 18.07.
• There may be some speculation of an unwind to trades that benefit from a Trump Presidency, such as the reflation theme (tax cuts, higher US rates/equities, firmer USD).
• Harris is strong odds to win the Democratic nomination, although the Republicans are still seen as strong favorites to claim the Presidency.
• Focus may also shift to the chances of a so-called red wave, in terms of the Republicans carrying the White House and both the House and Senate. Shifts on this front could impact Trump's ability to carry out his agenda.