Dollar Under Pressure from Lower T-Note Yields

The dollar index (DXY00) today is down by -0.17%.  Today’s decline in T-note yields is undercutting the dollar. Also, today’s weaker-than-expected report on the US Oct Empire manufacturing survey general business conditions is bearish for the dollar.

The US Oct Empire manufacturing survey general business conditions fell -23.6 to a 5-month low of -11.9, weaker than expectations of 3.6.

The markets are discounting the chances at 92% 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 down by -0.04% and posted a 2-1/4 month low. The euro is under pressure on expectations that the ECB will cut interest rates by 25 bp at this Thursday’s policy meeting.  The euro recovered most of its losses after Eurozone Aug industrial production posted its largest increase in 1-1/2 years, and after the German Oct ZEW survey expectations of economic growth rose more than expected.

Eurozone Aug industrial production rose +1.8% m/m, right on expectations and the largest increase in 1-1/2 years.

The German Oct ZEW survey expectations of economic growth rose +9.5 to 13.1, stronger than expectations of 10.0.

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 97% for the October 17 meeting and 100% for that -25 bp rate cut at the December 12 meeting.

USD/JPY (^USDJPY) today is down by -0.35%.  The yen today is moving higher after the 10-year JGB bond yield rose to a 2-1/4 month high of 0.978%, which boosts the yen’s interest rate differentials.  The yen extended its gains today after T-note yields declined. 

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 +5.20 (+0.20%), and December silver (SIZ24) is up +0.284 (+0.91%).  Precious metals today are posting moderate gains.  Today’s weaker dollar is supportive of metals prices.  Also, today’s decline in T-note yields is a positive factor for precious metals.  In addition, heightened tensions in the Middle East continue to boost safe-haven demand for precious metals.  Finally, expectations for the ECB to cut interest rates by 25 bp on Thursday are increasing demand for gold as a store of value.  Silver garnered support today after Eurozone Aug industrial production rose by the most in 1-1/2 years, a bullish factor for industrial metals.

Gains in silver are limited due to negative carryover from today’s slide in copper prices to a 3-week low. Also, the US Oct Empire manufacturing survey of general business conditions fell more than expected to a 5-month low, a bearish factor for industrial metals demand. 

More Precious Metal News from Barchart

• Stocks Mixed on Robust Bank Earnings and Weakness in Energy Stocks
• Dollar Gains and Gold Slips on Hawkish Fed Comments
• Stocks Climb on Strength in Tech and Earnings Optimism
• Dollar Rallies to a 2-Month High on Reduced Fed Rate Cut Expectations

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.