The dollar index (DXY00) Monday fell by -0.03%. The dollar fell slightly Monday as strength in the yen sparked long liquidation in the dollar. US Sep consumer credit was weaker than expected and bearish for the dollar. Losses in the dollar were limited Monday by higher T-note yields and weakness in stocks, which boosted liquidity demand for the dollar. The dollar also has carryover support from last Friday’s stronger-than-expected US payroll report that eliminated the odds of a 50 bp Fed rate cut at next month’s FOMC meeting.
US Sep consumer credit rose +$8.929 billion, weaker than expectations of $12.0 billion.
Hawkish comments on Monday from Minneapolis Fed President Kashkari were bullish for the dollar when he said the Fed still has a ways to go on reducing the size of its balance sheet, but it won't get back to pre-Covid levels.
The markets are discounting the chances at 85% 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) Monday fell by -0.02%. The euro on Monday posted modest losses after German Aug factory orders posted their biggest decline in 7 months, a bearish factor for the euro. Also, dovish comments Monday from ECB Governing Council member Villeroy de Galhau weighed on the euro when he said the ECB will "quite probably" cut interest rates at its meeting later this month. Losses in the euro were limited Monday after the Eurozone Oct Sentix investor confidence index rose more than expected, a bullish factor for the euro.
The Eurozone Oct Sentix investor confidence index rose +1.6 to -13.8, stronger than expectations of no change at -15.4.
Eurozone Aug retail sales rose +0.2% m/m, which is right on expectations.
German Aug factory orders fell -5.8% m/m, weaker than expectations of -2.0% m/m and the largest decline in 7 months.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 92% for the October 17 meeting and at 100% for that -25 bp rate cut at the December 12 meeting.
USD/JPY (^USDJPY) Monday fell by -0.41%. The yen recovered from a 7-week low against the dollar on Monday and posted moderate gains. Short covering emerged in the yen Monday based on comments from Japanese Finance Minister Kato, who said sudden currency moves hurt companies and households and that the government needs to carefully monitor any impact from them. Also, Monday’s regional report from the BOJ supported the yen after the BOJ upgraded its assessments for two regional economies. The yen Monday initially moved lower after the Japan Aug leading index CI fell more than expected to a 3-3/4 year low, a dovish factor for BOJ policy.
In its quarterly report released Monday, the BOJ upgraded its assessments for two regional economies and kept its assessment of 7 of 9 regions unchanged, signaling it remains on track to consider more interest rate increases.
The Japan Aug leading index CI fell -2.6 to a 3-3/4 year low of 106.7, weaker than expectations of 106.9.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 2% for the October 30-31 meeting and at +26% for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) Monday closed down -1.80 (-0.07%), and December silver (SIZ24) closed down -0.390 (-1.20%). Precious metals Monday were under pressure on negative carryover from last Friday after the stronger-than-expected US Sep payroll report eliminated the chances of the Fed cutting interest rates by -50 bp at next month’s FOMC meeting. Also, higher global government bond yields Monday weighed on precious metals.
Losses in precious metals were contained Monday as a slide in stocks boosted safe-haven demand for precious metals. Also, heightened Middle East hostilities have boosted safe-haven demand for precious metals. The markets are awaiting Israel’s response to last Tuesday’s missile barrage from Iran after Israeli Prime Minister Netanyahu vowed to retaliate, saying Iran “made a big mistake” and “will pay.” An increase in US inflation expectations also boosted demand for gold as an inflation hedge after the 10-year breakeven inflation rate rose to a 2-1/4 month high Monday.
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.
