The dollar index (DXY00) today is down by -0.13 %. The dollar is under pressure today on the likelihood of a government shutdown on Wednesday. Also, lower T-note yields today have weakened the dollar's interest rate differentials. In addition, comments today from Fed Vice Chair Philip Jefferson hint at the possibility of stagflation and were bearish for the dollar, as he warned that he sees a softening labor market and increasing inflation pressures. Finally, the larger-than-expected decline in the Conference Board US Sep consumer confidence index to a 5-month low weighed on the dollar. Losses in the dollar are limited after the Aug JOLTS job openings rose more than expected, a sign of strength in the labor market and a hawkish factor for Fed policy.
The US Jul S&P composite-20 home price index showed home prices rose +1.82% y/y, above expectations of +1.55% y/y, but still the slowest pace of increase in two years.
The US Sep MNI Chicago PMI unexpectedly fell -0.9 to 40.6, weaker than expectations of an increase to 43.3.
The US Aug JOLTS job openings rose +19,000 to 7.227 million, showing a stronger labor market than expectations of 7.200 million.
The Conference Board US Sep consumer confidence index fell -3.6 to a 5-month low of 94.2, weaker than expectations of 96.0.
Fed Vice Chair Philip Jefferson said, "I see risks to employment as tilted to the downside and risks to inflation to the upside."
Boston Fed President Susan Collins said, "I continue to see a modestly restrictive policy stance as appropriate, as the Fed works to restore price stability while limiting the risks of further labor market weakening." She added, "It may be appropriate to ease the policy rate a bit further this year, but the data will have to show that."
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) today is up by +0.11%. The euro is slightly higher today due to a weaker dollar. Also, stronger-than-expected price pressures in Germany are hawkish for ECB policy and supportive for the euro after German Sep CPI rose more than expected. Gains in the euro are limited after German Aug retail sales unexpectedly declined and German Sep unemployment rose more than expected.
The euro also has support from central bank divergence, as the markets view the ECB as largely finished with its rate-cut cycle, while the Fed is expected to cut rates by roughly two more times by the end of this year.
German Aug retail sales unexpectedly fell -0.2% m/m, weaker than expectations of 0.6% m/m.
The German Sep unemployment change increased by +14,000, showing a weaker labor market than expectations of +8,000.
German Sep CPI (EU harmonized) rose +2.4% y/y, stronger than expectations of +2.2% y/y and the strongest pace of increase in 7 months.
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 down by -0.48%. Today's weaker dollar is supportive for the yen. Also, the action by the BOJ to shrink its bond purchases signals a tighter monetary policy that is bullish for the yen after the BOJ said it will purchase fewer government bonds next quarter. Gains in the yen are contained after Japan's Aug industrial production fell more than expected and Aug retail sales unexpectedly declined. Finally, lower T-note yields today are positive for the yen.
Japan's Aug industrial production fell -1.2% m/m, weaker than expectations of -0.9% m/m.
Japan's Aug retail sales unexpectedly fell -1.1% m/m, weaker than expectations of +1.2% m/m.
The BOJ said it will buy 345 billion yen ($2.3 billion) of government notes due in 10 to 25 years every month next quarter, down from 405 billion yen in the July-September period. The BOJ's monthly buying across all maturities will decrease to 3.300 trillion yen in the October-December quarter from 3.705 trillion yen this quarter.
December gold (GCZ25) today is up +17.80 (+0.46%), and December silver (SIZ25) is down -0.386 (-0.82%). Precious metal prices today are mixed, with Dec gold posting a new contract high and nearest future (V25) posting a record high of $3,865.50 a troy ounce.
Precious metals are supported today by a weaker dollar and lower T-note yields. Also, precious metals continue to receive safe-haven support due to uncertainty tied to US tariffs, a possible US government shutdown on Wednesday, and the outlook for the Fed to cut interest rates by another 50 bp this year. Also, President Trump's attacks on Fed independence are boosting demand for gold, as he attempts to fire Fed Governor Cook. Additionally, Stephen Miran's intention to be a Fed Governor while still technically holding his White House job on the Council of Economic Advisors contributes to this uncertainty. Finally, geopolitical risks and global trade tensions have boosted safe-haven demand for precious metals.
Gains in precious metals are limited due to today's action by the BOJ to cut its government bond purchases, a sign of tighter monetary policy and a bearish factor for gold. Silver prices are under pressure today after the US Sep MNI Chicago PMI unexpectedly declined and Japan's Aug industrial production fell more than expected, a negative factor for industrial metals demand.
Precious metals prices continue to receive support from fund buying of precious metal ETFs. Gold holdings in ETFs rose to a nearly 3-year high on Monday, and silver holdings in ETFs rose to a 3-year high last Wednesday.
