The dollar index (DXY00) today is up slightly by +0.05% and posted a fresh 2-1/2 month high.  Today’s retreat in stocks is boosting liquidity demand for the dollar.  Also, today’s news that showed that the Oct Richmond Fed manufacturing survey rose to a 4-month high is bullish for the dollar. In addition, dovish comments today from ECB President Lagarde knocked the euro down to a 2-1/2 month low and benefited the dollar. 

The US Oct Richmond Fed manufacturing survey rose +7 to a 4-month high of -14, stronger than expectations of -17.

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 -0.10% and posted a new 2-1/2 month low.  Today’s Eurozone economic news weighed on the euro after Eurozone Sep new car registrations fell for a second month.  Losses in the euro accelerated on dovish comments from ECB President Lagarde, who said the direction of travel of interest rates in the Eurozone is clear.  Losses in the euro were limited by hawkish comments from ECB Governing Council member Escriva, who said he sees interest rates remaining higher than they were before the pandemic or Ukraine war.

Eurozone Sep new car registrations fell -6.1% y/y to 809,000 units.

ECB President Lagarde said the direction of travel of interest rates in the Eurozone is clear as inflation numbers are relatively assuring, and wage growth is starting to abate now. 

ECB Governing Council member Escriva said that while interest rates in the Eurozone are likely to go lower, "they will still be higher than those we saw before the pandemic or the war in Ukraine."

Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the December 12 meeting and a 33% chance of a -50 bp rate cut at the same meeting.

USD/JPY (^USDJPY) today is up by +0.07%.  The yen today added to Monday’s losses and posted a new 2-1/2 month low against the dollar.  The yen remains under pressure on recent BOJ comments that suggest that BOJ officials see little need to rush into raising interest rates.  Also, higher T-note yields are undercutting the yen.

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 31% for that +10 bp rate hike at the December 18-19 meeting.

December gold (GCZ24) today is up +13.10 (+0.48%), and December silver (SIZ24) is up +0.552 (+1.62%).  Precious metals today are moderately higher, with Dec gold posting a contract high.  Also, Dec silver posted a contract high, and nearest-futures (V24) posted a 12-year high. Precious metals continue to see strong safe-haven demand from Middle East tensions and uncertainty regarding next month's US presidential election.  Demand for gold as a store of value is also strong on expectations that whoever wins next month’s US presidential election, fiscal spending will climb and boost the budget deficit.  In addition, dovish comments today from ECB President Lagarde were bullish for precious metals when she said the direction of travel of interest rates in the Eurozone is clear.  Finally, fund buying of gold supports gold prices as long gold positions in ETFs rose to an 8-1/2 month high Monday.  

• Stocks Fall as Bond Yields Rise on Expectations of Slower Fed Rate Cuts
• Dollar Rallies as Hawkish Fed Comments Push T-note Yields Higher
• Stocks Pressured by Higher Bond Yields
• Dollar Gains on Higher T-note Yields