The dollar index (DXY00) on Monday was little changed. The dollar was undercut by reduced safe-haven demand after Israel launched a limited retaliatory strike against Iran, reducing the chances for an all-out Middle East conflagration. However, the dollar saw underlying support from Monday’s +3.4 bp rise in the 10-year T-note yield.
The markets are discounting the chances at 95% 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) on Monday rose by +0.17%. In a supportive comment for the euro, Belgian central bank chief Pierre Wunsch said there is no urgency to cut interest rates quicker and that the ECB could even live with a small, temporary overshoot of its inflation target. He said there is no great risk of a sustained dip in inflation below the ECB’s 2% target.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 43% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) on Monday rose by +0.61%. The yen fell on Japanese political uncertainty after the LDP-led coalition lost its majority in the lower house of Parliament in the weekend election. The yen fell on the reduced chance for an interest rate hike amidst the political uncertainty. However, Japanese stocks rallied on ideas that any coalition government might need to launch a fiscal stimulus plan to boost the economy.
December gold (GCZ24) on Monday closed up +1.30 (+0.05%), and December silver (SIZ24) closed up +0.222 (+0.66%). Precious metals have support from US political uncertainty ahead of next Tuesday’s US election. However, precious metals prices on Monday were undercut by reduced safe-haven demand after Middle East tensions fell on Israel’s limited retaliatory strike on Iran. Gold was also under pressure from higher US T-note yields and hawkish remarks by Belgium’s central bank chief.
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.
