The dollar index (DXY00) today is down by -0.25%. The dollar is lower today after weaker-than-expected US personal income and spending reports knocked T-note yields lower, a bearish factor for the dollar. Also, today’s benign US Aug core PCE deflator report boosted the chances for additional Fed interest rate cuts, which was negative for the dollar. The dollar recovered from its worst levels after the University of Michigan US Sep consumer sentiment index was revised upward to a 5-month high.
US Aug personal spending rose +0.2% m/m, slightly weaker than expectations of +0.3% m/m. Aug personal income rose +0.2% m/m, weaker than expectations of +0.4% m/m.
The US Aug core PCE price index rose +2.7% y/y, right on expectations.
The University of Michigan’s Sep US consumer sentiment index was revised upward by +1.1 to a 5-month high of 70.1, stronger than expectations of 69.4.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 54% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up by +0.031%. The euro today is slightly higher on the dollar’s weakness. However, gains in the euro are limited after today’s news showed a decline in Eurozone Aug inflation expectations and a smaller-than-expected increase in France Sep CPI, which boosted the chances for an interest rate cut by the ECB at its October policy meeting, a negative factor for the euro.
The Eurozone Sep economic confidence indicator fell -0.3 to 96.2, weaker than expectations of 96.5.
The ECB's Eurozone Aug 1-year inflation expectations eased to a 3-year low of +2.7% from +2.8% in July, right on expectations. The Aug 3-year inflation expectations eased to +2.3% from +2.4% in July, right on expectations.
France Sep CPI (EU harmonized) eased to +1.5% y/y from +2.2% y/y in Aug, weaker than expectations of +1.9% and the smallest increase in 3 years.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 85% 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 -1.55%. The yen recovered from a 3-1/2 week low against the dollar today and moved sharply higher after former defense minister Shigeru Ishiba, who is seen as supportive of the BOJ's plan to hike rates gradually, unexpectedly won the election for leader of the Liberal Democratic Party, defeating Sanae Takaichi, who had opposed interest rate hikes. The yen extended its gains after T-note yields fell on weaker-than-expected US economic reports. The yen today initially moved lower after the Sep Tokyo CPI eased, a dovish factor for BOJ policy.
The Japan Aug leading index CI was revised lower to 109.3 from the previously reported 109.5.
The Japan Sep Tokyo CPI eased to +2.2% y/y from +2.6% y/y in Aug, right on expectations. Sep Tokyo CPI ex-fresh food and energy rose +1.6% y/y, unchanged from Aug and right on expectations.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 4% for the October 30-31 meeting and at +25% for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) today is down -9.10 (-0.34%), and December silver (SIZ24) is up +0.019 (+0.06%). Precious metals today are mixed. A weaker dollar today is bullish for metals prices. Also, lower global bond yields today are supportive of precious metals. In addition, today’s weaker-than-expected US personal income and spending reports were dovish for Fed policy. Finally, today’s Eurozone reports showed a decline in inflation expectations and weaker-than-expected French Sep CPI, which boosted the chances for further rate cuts by the ECB, a supportive factor for gold.
On the bearish side, today’s rally in global equity markets has curbed safe-haven demand for precious metals. Gold prices also fell today after the US Aug core PCE price index rose +2.7% y/y, which was right on expectations but still well above the Fed’s 2% inflation target, dampening hopes that the Fed will cut rates again by more than 25 bp.
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.
