A look at the day ahead in European and global markets from Rae

Wee

Investors kept a close eye on the first U.S. presidential

debate between Democratic President Joe Biden and his Republican

rival Donald Trump in early Asian hours on Friday, as the two

clashed on stage ahead of November's U.S. election.

The debate was hardly market moving, though if anything, it

probably did little to assuage concerns about the country's

political and economic future.

Biden - with his voice hoarse from a cold - notably stumbled

over his words multiple times, while Trump said tariffs will

decrease deficits and not increase inflation.

Market odds have narrowed slightly for a Trump win in the

wake of the debate, which could translate to upside risks in

inflation.

That would mean the Federal Reserve keeps rates higher for

longer, U.S. Treasury yields stay elevated and the dollar

remains resilient.

The dollar rose to a 10-day high against the Mexican peso

and climbed against other trade-sensitive currencies,

including the Canadian dollar, in the wake of the

debate.

The main market event is the release of the U.S. core

personal consumption expenditures (PCE) price index - the

Federal Reserve's preferred measure of inflation, later on

Friday.

Expectations are for the core PCE price index to have risen

2.6% on an annual basis in May, a slowdown from April's 2.8%.

Should the data line up with forecasts, that would likely

bolster bets the Fed will kick off its easing cycle in

September.

Analysts, however, are sceptical about the dollar's

downside. Major central banks elsewhere have already begun

monetary easing and there are a number of risks plaguing other

economies, such as political turmoil in Europe.

The first round of French elections is due to kick off this

Sunday.

Perhaps the biggest victim of the dollar's relentless

strength is the yen, which on Friday again tumbled to

a 38-year low.

The dollar effortlessly barged past the 161 yen level to

peak at 161.27 yen, while the euro similarly touched a record

high against the Japanese currency.

That kept traders on their toes for potential intervention

from Tokyo, with the country's appointment of a new top foreign

exchange diplomat on Friday fuelling expectations that a move

from authorities to shore up the yen could be imminent.

Also on Friday, separate data showed core inflation in

Japan's capital accelerated in June, while factory output

rebounded nationally in May.

Key developments that could influence markets on Friday:

- U.S. core PCE price index (May)

- UK Q1 GDP

- Germany import prices (May)

(Editing by Jacqueline Wong)