The dollar index (DXY00) today is down by -0.07%. The dollar today is under pressure after the University of Michigan US Oct consumer sentiment index unexpectedly declined. Also, today’s US Sep PPI report showed producer prices eased to 1.8% y/y, below the Fed’s 2.0% price target, bolstering expectations for a 25 bp interest rate cut at next month’s FOMC meeting.
US Sep PPI final demand eased to +1.8% y/y from +1.9% y/y in Aug, stronger than expectations of +1.6% y/y. Also, Sep PPI ex-food and energy rose +2.8% y/y, stronger than expectations of +2.6% y/y.
The University of Michigan US Oct consumer sentiment index unexpectedly fell -1.2 to 68.9, weaker than expectations of an increase to 71.0.
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) today is up by +0.12%. Today, the euro recovered from early losses and turned higher as the dollar fell when the US Sep consumer sentiment index unexpectedly declined. The euro also has support on higher Eurozone bond yields after the 10-year German bund yield rose to a 5-week high today, which strengthened the euro’s interest rate differentials. The euro today initially moved lower on expectations for the ECB to cut interest rates by 25 bp at next Thursday’s meeting are weighing on the euro.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% 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 +0.40%. The yen today is moderately lower and is just above Thursday’s 1-3/4 month low against the dollar. Today’s rally in the Nikkei Stock Index to a 2-week high has reduced safe-haven demand for the yen. Also, higher T-note yields today are undercutting the yen.
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 29% for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) today is up +29.50 (+1.12%), and December silver (SIZ24) is up +0.485 (+1.55%). Precious metals today are moderately higher. Dollar weakness today is supportive of metals prices. Also, an increase in inflation expectations boosted demand for gold as a store of value after the US 10-year breakeven inflation rate jumped to a 4-1/4 month high today. In addition, safe-haven demand for precious metals increased on ramped-up war rhetoric in the Middle East. Israeli Defense Minister Gallant said Israel's response to Iran's missile attack on Israel "will be deadly, precise and above all surprising," while Iran said it's ready to launch thousands of missiles at Israel if needed.
Higher global bond yields today are limiting gains in precious metals. Also, today’s stronger-than-expected US Sep PPI report may keep the Fed from aggressively cutting interest rates, a negative factor 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.
