The dollar index (DXY00) today is up by +0.07% and just below Wednesday's 1-week high. The dollar garnered support from today's US existing home sales report, which showed sales rose to a 7-month high. Also, higher T-note yields today strengthened the dollar's interest rate differentials. In addition, weakness in the yen is benefiting the dollar, as the yen fell to a 1.5-week low today on concerns that new Japanese Prime Minister Takaichi will advocate a less hawkish monetary policy. Gains in the dollar are limited due to the ongoing shutdown of the US government. The longer the shutdown is maintained, the more likely the US economy will suffer and the more likely the Fed will have to cut interest rates.
US Sep existing home sales rose +1.5% m/m to a 7-month high of 4.06 million, right on expectations.
The markets are pricing in a 99% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29.
EUR/USD (^EURUSD) today is up by +0.01%. The euro recovered from overnight losses today and turned slightly higher after the Eurozone Oct consumer confidence indicator survey unexpectedly rose to an 8-month high. The euro also has support from central bank divergence, with the Fed expected to continue cutting interest rates, while the ECB is nearing the end of its rate-cutting cycle. Limiting gains in the euro is today's stronger dollar. Also, the political crisis in France is weighing on the euro as the French government struggles to pass a budget.
The Eurozone Oct consumer confidence indicator survey unexpectedly rose +0.7 to an 8-month high of -14.2, stronger than expectations of a decline to -15.0.
Swaps are pricing in a 1% chance of a -25 bp rate cut by the ECB at the October 30 policy meeting.
USD/JPY (^USDJPY) today is up by +0.47%. The yen tumbled to a 1.5-week low against the dollar today amid concerns that new Japanese Prime Minister Takaichi will advocate a less hawkish monetary policy, which would be bearish for the yen. Also, higher T-note yields today are negative for the yen.
December COMEX gold (GCZ25) today is up +89.00 (+2.19%), and December COMEX silver (SIZ25) is up +1.114 (+2.34%). Gold and silver prices are sharply higher today as precious metals rebounded after two days of heavy losses. The US late Wednesday announced sanctions on Rosneft PJSC and Lukoil PJSC, Russia's biggest oil producers, sending crude prices soaring by more than 5% today, increasing inflation expectations, and boosting demand for precious metals as a hedge against inflation.
Gold and silver prices rallied to record highs last week as they extended their two-month-long parabolic rally. Precious metals continue to receive safe-haven support amid the ongoing US government shutdown, uncertainty over US tariffs, geopolitical risks, central bank buying, US-China trade tensions, and President Trump's attempts to undermine Fed independence. In addition, recent weaker-than-expected US economic news has bolstered the outlook for the Fed to keep cutting interest rates, a bullish factor for precious metals.
Precious metals prices continue to receive support from fund buying of precious metal ETFs. Gold holdings in ETFs rose to a 3-year high on Tuesday, and silver holdings in ETFs rose to a 3.25-year high on the same day.
