Yields Plunge, Gold, Silver Prices Soar, Stocks Rise
Recap
The Dollar Index slumped while gold and silver prices soared on hopes that the Fed will start easing sooner than expected. The yield on the 10-year US Treasury note fell to 4.34% from 4.39%.
Federal Reserve Governor and U.S. economist Christopher Waller, often seen as hawkish, said there was “no need to keep interest rates really high if inflation is falling consistently.”
The Dollar Index (DXY), which measures the greenback against a basket of 6 major currencies, fell 0.45% to 102.75 (103.25), a fresh 3-month low.
The euro (EUR/USD) rose to 1.0988 from 1.0955 yesterday, while the British pound (GBP/USD) climbed to 1.2695 from 1.2625 yesterday. Broad-based dollar weakness lifted both the euro and the pound.
Meanwhile, the Kiwi (NZD/USD) found its wings and jumped 0.55% against the Dollar ahead of today’s RBNZ interest rate decision. The Reserve Bank of New Zealand is expected to keep its official cash rate at 5.5%.
The Aussie battler (AUD/USD) jumped to 0.6653 from 0.6603, buoyed by the overall weaker Greenback. The U.S. dollar was lower against the Asian and emerging market currencies. USD/CNH (dollar-offshore Chinese yuan) slipped to 7.1410 from 7.1650, while USD/THB (dollar-Thai baht) fell.
Against the yield-sensitive Japanese yen, the greenback fell to 147.45 from 148.65 yesterday. In volatile trading, the USD/JPY rose to an overnight high of 148.83.
Wall Street stocks rallied on hopes that the Fed is done raising interest rates. The DOW climbed to 35,430 from yesterday’s 35,350. The U.S. S&P 500 rose to 4,555 from 4,550.
In economic data released yesterday, Japan’s BOJ annual core CPI fell to 3.0% from 3.4%, below forecasts of 3.4%. The Eurozone’s GFK Consumer Climate rose to 27.8 from -28.1.
The U.S. Conference Board’s November Consumer Confidence Index jumped to 102.0 from a downwardly revised 99.1, beating forecasts of 101.0.
EUR/USD – The common currency extended its rally against the greenback, climbing 0.27% to 1.0988 in late New York trading. Overnight, the euro rose to an overnight and 3-month high of 1.1009. The overnight low was 1.0934.
AUD/USD – The Aussie Battler rebounded against the greenback to 0.6653 from 0.6603 yesterday. The Australian dollar rose to 0.6657, an overnight high last seen in early August this year. The overnight low was 0.6596.
USD/JPY – In another volatile trading session, the greenback rose to an overnight high of 148.83 before falling back. The overnight low for the greenback was 147.32. In late New York trading, the greenback was trading at 147.45.
GBP/USD – The British Pound gained against a broadly weaker U.S. Dollar, trading at 1.2695 from yesterday’s 1.2625. The Pound’s overnight low was 1.2607, while its overnight high was 1.2715.
On the lookout
Today’s economic calendar kicks off with Australia’s annual CPI for September, which is expected to fall from 5.6% to 5.2% (ACY Finlogix).
New Zealand’s RBNZ holds a press conference on its interest rate decision (13:00 Sydney) following its monetary policy meeting (12:00 Sydney).
Markets are expecting the RBNZ to hold policy steady and keep the overnight cash rate unchanged at 5.5%.
There are no other data releases out of Asia. Italy leads off Europe with its Italian November Consumer Confidence report (f/c 102 from 101.6 previously – ACY Finlogix).
The UK is next with its UK October Mortgage Approvals (f/c 45K from 43,328K – ACY Finlogix) and UK October Consumer Credit (f/c GBP 1.5 billion from GBP 1.391 billion – ACY Finlogix).
Next up is the Eurozone November Economic Sentiment (f/c 93.7 from 93.3 previously – ACY Finlogix). Italy will also release its October PPI (m/m f/c 0.3% from 0.6%; y/y f/c -10.6 from -14.1 – ACY Finlogix).
Rounding out today’s data releases are the US Preliminary GDP (q/q f/c 5.0% from 4.9% – FX Street), US Preliminary CPI (q/q f/c 3.5% from 3.5% – FX Street), US Goods Trade Balance (f/c -USD 86.4 bn from an upwardly revised deficit of -USD 86.8 bn – FX Street).
The Fed will also release its Beige Book (US economic activity).
Trading Perspective
The Greenback is expected to remain under pressure from lower US yields as expectations grow that the Fed is basically done with rate hikes.
The yield on the benchmark 10-year US Treasury note fell 5 basis points to 4.34% in late New York. Earlier this week, the 10-year yield was at 4.47%.
That’s a whopping 13 basis points in 3 trading days. Overnight, the two-year US Treasury yield fell from 4.89% to 4.74%. While other global bond yields fell on the back of lower US rates, their decline was less pronounced.
Traders will be focusing on economic data releases as well as further Fedspeak.
EUR/USD – The euro closed firmer at 1.0988 versus yesterday’s close of 1.0955. The common currency broke above 1.10 to 1.1009 overnight highs before easing. Look for immediate resistance today at 1.1010 followed by 1.1040. On the downside, immediate support can be found at 1.0960 and 1.0930 (overnight low traded at 1.0934). Expect the euro to maintain its bid today, likely range: 1.0930-1.1030.
USD/JPY – The dollar plunged against the Japanese yen to close at 147.45 in New York from yesterday’s close of 148.65. “What goes up must come down” sang the famous 70’s pop group Blood Sweat and Tears. Immediate support is at 147.30, followed by 147.00 and 146.70. On the upside, look for immediate resistance at 147.80, 148.30 and 148.80. Look for more choppy trading today, probably between 147 and 149. Happy days!
AUD/USD – The Aussie dollar rebounded and jumped to 0.6653 against the greenback from 0.6603 yesterday. Immediate resistance today is at 0.6670 (overnight high traded at 0.6666). The next resistance level is at 0.6700 0.6730. On the downside, look for immediate support at 0.6620, 0.6590 (overnight low was 0.6596), and 0.6560. Look for more choppy trading in this pair, likely between 0.6600 and 0.6700. Looking to sell Aussie rallies.
GBP/USD – The Pound rose to 1.2695 from yesterday’s open of 1.2625 against a generally weaker US Dollar. Immediate resistance for the day is at 1.2715 (overnight high). Next resistance is at 1.2745 and 1.2785. Immediate support can be found at 1.2660, followed by 1.2630 and 1.2600 (overnight low traded at 1.2607). Look for the British Pound to trade in a likely range of 1.2610-1.2710 today.
