The dollar index (DXY00) is down by -0.28% and modestly above Monday’s 2-week low. Long liquidation is weighing on the dollar ahead of the results of today’s US presidential election, which is too close to call. Also, today’s US Sep trade deficit was wider than expected, a negative factor for Q3 GDP and the dollar. The dollar recovered from its worst level after the US Oct ISM services index unexpectedly rose to a 2-1/4 year high.
The US Sep trade deficit was -$84.4 billion, wider than expectations of -$84.0 billion and the largest deficit in nearly 2-1/2 years, a negative factor for Q3 GDP.
The US Oct ISM services index unexpectedly rose +1.1 to 56.0, stronger than expectations of a decline to 53.8 and the strongest pace of expansion in 2-1/4 years.
The markets are discounting the chances at 97% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up by +0.18% and is just below Monday’s 2-1/2 week high. Today’s weaker dollar is boosting the euro. Also, today’s better-than-expected Eurozone economic news supported the euro after France's September manufacturing production fell less than expected.
French Sep manufacturing production fell -0.8% m/m, a smaller decline than expectations of -1.3% m/m.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 17% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is down by -0.09%. The yen today is slightly higher, boosted by a weaker dollar. The yen’s upside is limited after the 10-year JGB bond yield today fell to a 3-1/2 week low, weakening the yen’s interest rate differentials. Also, dovish comments today from Japan's Democratic Party for the People leader Tamaki undercut the yen when he suggested the BOJ keep monetary policy steady and not raise interest rates. In addition, higher T-note yields today are bearish for the yen.
Japan's Democratic Party for the People leader Tamaki said that trying to move currencies with short-term BOJ policy is superficial, and the central bank should keep monetary policy unchanged for some time.
December gold (GCZ24) today is up +2.80 (+0.10%), and December silver (SIZ24) is up +0.301 (+0.92%). Precious metals recovered from early losses today and are moderately higher. Today’s dollar weakness is supportive of precious metals. Also, political uncertainty from today's US presidential election is boosting safe-haven demand for precious metals as the election is considered a toss-up. In addition, expectations for the Fed to cut interest rates by -25 bp on Thursday boosted demand for precious metals as a store of value. Finally, the ongoing hostilities in the Middle East continue to boost safe-haven demand for precious metals.
Silver has carryover support from today’s rally in copper prices to a 3-week high after the China Oct Caixin services PMI and the US Oct ISM services index rose more than expected, positive factors for industrial metals demand.
Precious metals prices are being undercut by strength in stocks, which curbed safe-have demand. Also, higher T-note yields today are bearish for precious metals.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
