The dollar index (DXY00) today is down by -0.61% at a 2-week low. The dollar is under pressure today after polls over the weekend shifted in favor of Democratic candidate Harris for president. Harris’ high-tax and low tariff policies are seen as limiting growth and inflation and are seen as more negative for the dollar than Republican candidate Trump’s low-tax and high-tariff policies. Also, lower T-note yields today have weakened the dollar’s interest rate differentials. In addition, expectations that the FOMC will cut interest rates by 25 bp on Wednesday are undercutting the dollar.
US Sep factory orders fell -0.5% m/m, which is right on expectations.
The markets are discounting the chances at 99% 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 +0.60% at a 2-1/2 week high. The slumping dollar today is lifting the euro. The euro also garnered support from today’s economic news that showed an upward revision to the Eurozone Oct manufacturing PMI and an increase in the Eurozone Nov Sentix investor confidence index to a 4-month high.
The Eurozone Oct manufacturing PMI was revised upward by +0.1 to 46.0 from the previously reported 45.9.
The Eurozone Nov Sentix investor confidence index rose +1. to a 4-month high of -12.8, although weaker than expectations of -12.6.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 17% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is up by +0.74%. The yen today is moderately higher and climbed to a 1-week high against the dollar. The decline in T-note yields today is supportive of the yen. Thin trading conditions today may exaggerate moves in the yen with Japanese markets closed for the Culture Day holiday.
December gold (GCZ24) today is up +5.20 (+0.192%), and December silver (SIZ24) is up +0.129 (+0.39%). Precious metals today are posting modest gains. Today’s retreat in the dollar index to a 2-week low is bullish for metals prices. Also, today’s slide in global bond yields is supportive of precious metals. In addition, expectations for the Fed to cut interest rates by 25 bp are boosting demand for precious metals as a store of value. Silver has carryover support from today’s rally in copper prices to a 2-week high.
Gold continues to benefit from safe-haven demand due to political uncertainty ahead of Tuesday's US presidential election. Also, there is Japanese political uncertainty after the ruling LDP lost its majority in the lower house in this past weekend's election. Finally, the ongoing conflict in the Middle East continues to boost safe-haven demand 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.
