Markets are beginning to price in the so-called "Trump trade,” with betting odds increasingly favoring a Republican sweep in the upcoming elections, JPMorgan strategists said.

Specifically, the probability of President Trump's re-election has risen to 56% according to betting markets, while the likelihood of a Republican-controlled Senate has surpassed 80%, with expectations of three seats changing hands.

At the same time, the odds of a Democratic majority in the House have decreased from over 60% to around 55%.

The rising probability of a Republican sweep has also been reflected in recent market movements over the past two weeks, including stronger U.S. equities—particularly in the banking sector—a strengthening dollar, tighter credit spreads, and higher yields on U.S. Treasury securities.

That said, "we do not believe that the probability of a Republican sweep embedded in markets at the moment is as high as the around 45% currently implied by betting odds,” JPMorgan strategists said in a note.

The strategists argue that if the "Trump trade" is considered similarly to its manifestation in 2016—characterized by higher Treasury yields, a stronger dollar, U.S. equities outperforming international markets, banking sector outperformance, and tighter credit spreads—the recent market shifts have been modest.

Although current asset performances suggest a significantly higher probability of a Trump victory compared to two weeks ago, markets are still “a long way from fully pricing the 2016 experience,” strategists note.

"In other words, while markets have now begun to price in a more significant probability of a Republican sweep, we believe that there are still some way from even pricing the around 45% probability implied by betting odds, let alone from fully pricing in a Republican sweep," they wrote.

FRANKFURT (Reuters) - Euro zone inflation could return to the European Central Bank's 2% target sooner than earlier thought and will likely hover around this level even in the longer term, a fresh ECB survey showed on Friday.

The ECB lowered interest rates for the third time this year on Thursday on moderating price pressures and investors now see rate cuts at each of its next four or five meetings as inflation is within striking distance of 2%.

Economists in the ECB's Survey of Professional Forecasters now see inflation next year at 1.9%, below the 2% predicted three months ago, and see it holding at 1.9% in 2026.

This is somewhat quicker than the ECB's own forecast, which puts inflation back at target only in the final quarter of 2025, and sees the year's average at 2.3%.

In the longer term, defined as 2029, inflation is seen at 2.0%, right on the ECB's target.

The bank has spent the past three years fighting the worst bout of inflation in over a generation but some policymakers now think there is a realistic risk the bank could return to undershooting 2%.

Forecasts for underlying inflation, a key concern for policymakers because of rapid price growth in services, was unchanged at 2.2% in 2025 and 2.0% in 2026.

The survey, an important input in the ECB's policy deliberations, also predicted economic growth at 1.2% next year, below the 1.3% seen earlier, which would then accelerate to 1.4% in the following year.

The Chinese economy grew as expected in the third quarter, gross domestic product data showed on Friday, although the economy’s pace of growth remained below Beijing’s annual target.

Chinese GDP grew 4.6% year-on-year in the three months to September 30 in line with expectations but slowing from the 4.7% seen in the prior quarter.

GDP grew 0.9% quarter-on-quarter, slightly missing expectations of 1%.

This brought year-to-date GDP growth to 4.8%, still below Beijing’s 5% annual target.

Beijing announced a string of stimulus measures in the past three weeks, marking China’s most concentrated efforts yet to shore up sluggish economic growth. A sustained deflationary trend, weak private spending and a prolonged property market crash have been the biggest weights on the Chinese economy in recent years.

Recent stimulus, however, sparked mixed sentiments towards the economy, given that Beijing did not provide key details on the timing and scope of the planned measures.

Still, the Chinese government said the economy remained on track to achieve its 5% annual target. The government also announced targeted measures to support the property market, as well as plans to improve the debt positions of local governments.

Separate data on Friday showed China’s industrial production and retail sales both grew more than expected in September, while the country’s unemployment rate fell to 5.1% against expectations it would remain at 5.3%.

Gold prices hit a record high in Asian trade on Friday, benefiting from safe haven demand with just weeks left to a closely contested U.S. presidential election, while an interest rate cut by the European Central Bank also helped.

Spot gold rose 0.4% to a record high of $2,705.26 an ounce, while gold futures expiring in December rose 0.5% to $2,720.15 an ounce.

The yellow metal firmed even as strong U.S. retail sales and labor market data furthered bets that U.S. interest rates will fall at a slower pace in the coming months.

Gold buoyed by pre-election safe haven demand Bullion prices broke out of a tight trading range seen in the past two weeks, hitting new peaks as the U.S. election approached.

Recent polls showed Vice President Kamala Harris and former president Donald Trump set for a tight presidential race, with less than three weeks left to the ballot.

The disparity in the stances of both candidates spurred increased uncertainty over what the results of the election will entail.

While media polls showed Harris with a small lead over Trump, prediction and betting markets largely leaned towards a Trump victory, sparking more uncertainty over the potential outcome.

Gold was also favored by safe haven demand as the Middle East conflict raged on. Traders were bracing for Israel’s retaliation against Iran over an early-October attack.

Gold brushes off stronger dollar The yellow metal firmed despite pressure from a stronger dollar, as the greenback hit an over 2-½ month high this week.

At 03:40 ET (08:40 GMT), the DAX index in Germany traded 0.1% lower, the CAC 40 in France fell 0.1% and the FTSE 100 in the U.K. dropped 0.4%.

ECB cuts interest rates again The European Central Bank cut interest rates on Thursday by 25 basis points to 3.25%, following on from September’s move - the first back-to-back rate cut since 2011.

Although this reduction was widely expected, the quickening pace of rate cuts points to a worsening economic outlook amid signs that inflation is increasingly under control.

There was some good economic news in Europe Friday, after data showed that UK retail sales rose 0.3% on the month in September, annual growth of 3.9%.

This compares with expectations for a monthly fall of 0.3%, and a year-on-year gain of 3.2%.

Additionally, gross domestic product data showed the Chinese economy grew 4.6% in the third quarter, largely as expected although the economy’s pace of growth remained below Beijing’s annual target.

This brought year-to-date GDP growth to 4.8%, still below Beijing’s 5% annual target.

Crude on track for weekly losses Oil prices edged higher Friday, but remained on track for their biggest weekly loss in more than a month on concerns about demand.

By 03:05 ET, the Brent contract climbed 0.4% to $74.73 per barrel, while U.S. crude futures (WTI) traded 0.5% higher at $71.00 per barrel.

Both benchmarks settled higher on Thursday for the first time in five sessions after data showed that official US inventories fell last week, but are still set to fall about 6% this week, their biggest weekly decline since Sept. 2.

Both OPEC and the International Energy Agency cut their forecasts for global oil demand earlier this week, adding to ongoing concerns about demand growth, largely centered around China.