The dollar index (DXY00) today is down by -0.06%. The dollar is under pressure today from lower T-note yields. Also, the strength in stocks today has reduced liquidity demand for the dollar. Losses in the dollar were limited today after US Sep capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose more than expected and after the University of Michigan US Oct consumer sentiment index was revised upward to a 6-month high.
US Sep capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, rose +0.5% m/m, stronger than expectations of +0.1% m/m.
The University of Michigan US Oct consumer sentiment index was revised upward by +1.6 to a 6-month high of 70.5, stronger than expectations of 69.0.
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) today is up by +0.08%. Today, the euro is supported by a weaker dollar. Also, today’s stronger-than-expected German Oct IFO business confidence report is bullish for the euro. In addition, hawkish comments today from ECB Governing Council member Simkus boosted the euro when he pushed back on speculation that the ECB should cut interest rates by 50 bp at the next ECB meeting.
Gains in the euro today were contained after the Eurozone Sep M3 money supply rose by the most in 1-3/4 years, a negative factor for the euro. Also, ECB Sep inflation expectations eased, a dovish factor for ECB policy.
Eurozone Sep M3 money supply rose +3.2% y/y, stronger than expectations of +2.9% y/y and the highest in 1-3/4 years.
The Eurozone Sep ECB 1-year inflation expectations eased to a 3-year low of +2.4% from +2.7% in Aug, better than expectations of 2.6%. The Sep 3-year inflation expectations eased to a 3-year low of 2.1% from 2.3% in Aug, better than expectations of 2.2%.
The German Oct IFO business climate rose +1.1 to 86.5, stronger than expectations of 85.6.
ECB Governing Council member Simkus said, "As I read the data, I don't see a case for a 50 bp rate cut" from the ECB.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 meeting and a 42% chance of a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is up by +0.14%. The yen today is slightly lower after comments from BOJ Governor Ueda signaled no hike in interest rates by the BOJ at next week’s policy meeting. Losses in the yen were limited after Japan Oct Tokyo core CPI rose more than expected, a hawkish factor for BOJ policy. Also, today’s decline in T-note yields is supportive of the yen.
The Japan Aug leading index CI was revised upward by +0.2 to 106.9 from the previously reported 106.7.
The Japan Oct Tokyo CPI eased to +1.8% y/y from +2.1% y/y in Sep, right on expectations. The Oct Tokyo CPI ex-fresh food and energy rose +1.8% y/y, stronger than expectations of +1.6% y/y.
BOJ Governor Ueda signaled that the BOJ would not hike interest rates next week when he said, "I believe the BOJ has enough time" before making a policy decision on interest rates.
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 21% for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) today is down -3.90 (-0.14%), and December silver (SIZ24) is up +0.150 (+0.44%). Precious metals today are mixed. Profit-taking is weighing on precious metals today after this week’s rally in gold to a record high and rally in silver to a 12-year high. Strength in stocks today has curbed safe-haven demand for precious metals. Also, hawkish comments today from ECB Governing Council member Simkus undercut gold when he said he couldn’t justify a 50 bp interest rate cut by the ECB.
Losses in precious metals today are limited due to a weaker dollar and lower T-note yields. Also, precious metals have underlying support from safe-haven demand from Middle East tensions and uncertainty regarding next month's US presidential election. In addition, demand for gold as a store of value is also strong, based on expectations that the US budget deficit will continue to be a major problem regardless of who wins next month's US presidential election. Silver prices recovered from early losses today and moved higher after US Sep capital goods new orders nondefense ex-aircraft and parts rose more than expected, and the University of Michigan US Oct consumer sentiment index was revised upward to a 6-month high, supportive factors for industrial metals demand.
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.
