The dollar index (DXY00) today is down by -0.08%. The dollar is slightly lower today as strength in the yen sparked long liquidation in the dollar. Losses in the dollar are limited by higher T-note yields and weakness in stocks, which boosts 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.
The markets are discounting the chances at 88% 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%. Weakness in the dollar today lent mild support to the euro. Also, today’s Eurozone Oct Sentix investor confidence index rose more than expected and was bullish for the euro. Gains in the euro were limited after German Aug factory orders posted their biggest decline in 7 months, a bearish factor for the euro. Also, dovish comments 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.
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) today is down by -0.52%. The yen today recovered from a 7-week low against the dollar and is moderately higher. Short covering emerged in the yen today 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, today’s regional report from the BOJ supported the yen after the BOJ upgraded its assessments for two regional economies. The yen today 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 today, 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 3% for the October 30-31 meeting and at +23% for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) today is down -3.60 (-0.13%), and December silver (SIZ24) is down -0.269 (-0.83%). Precious metals today are posting moderate losses 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 today are bearish for precious metals. In addition, Friday’s rally in stocks curbed safe-haven demand for precious metals.
Precious metals have underlying support from Middle East hostilities that 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 new 2-month high today.
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.
