The dollar index (DXY00) today is up by +0.28% at a 2-month high. The dollar is moderately higher on reduced Fed interest rate expectations after last week’s US consumer and producer price reports for September were stronger than expected. Also, weakness in the yen is boosting the dollar as the yen tumbled to a 2-1/4 month low today against the dollar.
Today’s comments from Minneapolis Fed President Kashkari signal he favors a gradual pace of interest rate cuts when he said it appears likely that "further modest reductions" in the federal funds rate will be appropriate in coming quarters.
The markets are discounting the chances at 87% 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 down by -0.26%. The euro today is moderately lower and is holding just above last Thursday’s 2-month low. Today's dollar strength is undercutting the euro, along with expectations that the ECB will cut interest rates by 25 bp at this Thursday’s policy meeting.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 96% for the October 17 meeting and 100% for that -25 bp rate cut at the December 12 meeting.
USD/JPY (^USDJPY) today is up by +0.50%. The yen tumbled to a 2-1/4 month low today against the dollar. Last week’s stronger-than-expected US consumer and producer price reports dampened speculation that the Fed will aggressively cut interest rates, which has boosted the dollar and weighed on the yen. Trading volumes are below average, and moves in the yen could be exaggerated today with Japanese markets closed for a holiday.
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 27% for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) today is down -7.50 (-0.28%), and December silver (SIZ24) is down -0.210 (-0.66%). Precious metals today are moderately lower. Today’s rally in the dollar index to a 2-month high is bearish for metals. Also, higher global bond yields today are undercutting precious metals prices. In addition, today’s rally in stocks has reduced safe-haven demand for precious metals. Silver prices are being undercut today by weaker-than-expected news on Chinese Sep exports and imports, a negative factor for global economic growth prospects and industrial metals demand.
Losses in precious metals today are contained as heightened tensions in the Middle East boost safe-haven demand for precious metals. Also, expectations for the ECB to cut interest rates by 25 bp on Thursday are increasing demand for gold as a store of value.
Trade news from China was weaker than expected, a negative factor for global growth prospects and industrial metals demand. China Sep exports rose +2.4% y/y, weaker than expectations of +6.0% y/y. Also, Sep imports rose +0.3% y/y, weaker than expectations of +0.8% y/y.
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.
