The dollar index (DXY00) today is trading slightly lower by -0.04%. The dollar was undercut by today's slightly-weaker-than-expected US CPI report, which gave the Fed a bit more lattitude to cut interest rates. The dollar is also being undercut by today's -1.4 bp decline in the US 10-year T-note yield, which hurts the dollar's interest rate differentials.
The Sep US CPI report of +0.3% m/m and +3.0% y/y was slightly weaker than market expectations of +0.4% m/m and +3.1% y/y. Also, the Sep core CPI report of +0.3% m/m and +3.1% y/y was slightly weaker than market expectations of +0.2% m/m and +3.1% y/y. Although the US CPI report was slightly weaker than expected, the Sep CPI report of +3.0% y/y rose to match the current 16-month high, and the core CPI report of +3.0% y/y was still far above the Fed’s inflation target of +2.0%.
Also on the bearish side for the dollar, the final-Aug University of Michigan US consumer sentiment index fell -1.4 points to 53.6, which was weaker than market expectations of a -0.5 point drop to 54.5.
On the bullish side for the dollar, today's Oct S&P US manufacturing PMI report rose +0.2 to 52.2, stronger than expectations of unchanged at 52.0. Also, the Oct S&P US services PMI report rose +1.0 to 55.2, stronger than expectations for a -0.7 point decline to 53.5.
The dollar continues to be undercut by the ongoing US government shutdown. 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.
The markets are pricing in a 97% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29.
EUR/USD (^EURUSD) is up +0.06%. The euro is seeing support from dollar weakness.
The euro is also seeing support from today's news that the preliminary-Oct HCOB Eurozone manufacturing PMI rose by +0.2 points to 50.0, which was stronger than expectations for an unchanged report at 49.8. Also, the preliminary-Oct HCOB Eurozone services PMI rose by +1.3 points to 52.6, which was stronger than market expectations for a -0.1 point drop to 51.2.
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 +0.16%. The yen is seeing support as the flip-side to weakness in the dollar.
December COMEX gold (GCZ25) today is down -2.2 (-0.05%), and December COMEX silver (SIZ25) is down -0.169 (-0.35%). Gold prices are trading lower amid negative technical sentiment tied to the heavy long liquidation pressure seen earlier this week. Gold is trading lower despite today's dovish US CPI report, which was supportive for gold. Silver prices are seeing underlying support from today's stronger-than-expected US PMI reports, which were supportive for industrial metals demand.
Precious metals continue to receive safe-haven support due to 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.
