Dollar slides to three-month trough ahead of US growth data
Dollar declined in European trade on Wednesday against a basket of major rivals, sharpening losses for the fifth day in a row and plumbing a three-month trough as investors sell off the dollar and US treasury bonds.
Now investors await crucial US data later today on third quarter GDP growth to determine the likely path ahead for policies.
The Index
The dollar index fell over 0.25% to 102.47, the lowest since August 10, with a session-high at 102.81, after losing 0.5% yesterday, the fourth loss in a row following bearish remarks from Fed officials.
US Yields
US Yields 10-year treasury yields fell 1.6% to 4.257%, the lowest since September 14, with a session-high at 4.326%.
The yields lost 1.5% on Tuesday, the second loss in a row following bearish remarks by Fed officials.
Cautious Remarks
Fed member Christopher Waller, a usual hawk, said the Fed is on track to bring inflation back to the 2% target.
Fed Chicago President Austen Goolsbey said that inflation has slowed rapidly this year, while New York President John Williams lauded the recent drop in prices as monetary tightening measures bear fruit.
US Rates
Following the remarks, odds for a US interest rate hike at the December 13 meeting stood at just zero.
Odds for an interest rate cut by the Federal Reserve in March 2024 surged from 21.5% to 40%.
Now investors await US GDP growth data later today, expected to clock in a 5% growth rate in the second reading, up from 2.1% in the second quarter.
US 10-year treasury yields tumble to two-month lows on cautious remarks
US 10-year treasury yields fell on Wednesday for the third straight session to two-month lows on cautious remarks by several Fed officials.
Such remarks hurt the chances of another interest rate hike in December and boosted the odds for a rate cut in the first quarter of 2024.
US Yields 10-year treasury yields fell 1.6% to 4.257%, the lowest since September 14, with a session-high at 4.326%.
The yields lost 1.5% on Tuesday, the second loss in a row following bearish remarks by Fed officials.
Cautious Remarks
Fed member Christopher Waller, a usual hawk, said the Fed is on track to bring inflation back to the 2% target.
Fed Chicago President Austen Goolsbey said that inflation has slowed rapidly this year, while New York President John Williams lauded the recent drop in prices as monetary tightening measures bear fruit.
US Rates
Following the remarks, odds for a US interest rate hike at the December 13 meeting stood at just zero.
Odds for an interest rate cut by the Federal Reserve in March 2024 surged from 21.5% to 40%.
Now investors await US GDP growth data later today, expected to clock in a 5% growth rate in the second reading, up from 2.1% in the second quarter.
Gold extends gains to six-month high ahead of US growth data
Gold prices rose in European trade on Wednesday, extending gains for the fifth straight session, and scaling a six-month high as the dollar and US treasury yields declined.
Recent bearish remarks by Fed officials all but demolished the bets on another interest rate hike in December, and boosted the odds for an interest rate cut in March 2024.
Now investors await US growth data for the third quarter to reassess such odds and measure the inflationary pressures on the Federal Reserve.
Gold Prices Today
Gold prices rose 0.55% to $2,052 an ounce, the highest since May 5, with a session-low at $2,040, after rising 1.35% on Tuesday, the fourth profit in a row, and the largest since October 19 as the dollar swoons.
As gold surfs a strong wave of gains, prices are approaching a record high at $2,081, scaled on May 4.
The Dollar
The dollar index fell 0.3% on Wednesday, sharpening losses for the fifth straight session, plumbing a three-month trough at 102.47 against a basket of major rivals.
US 10-day treasury yields fell over 1.5%, plumbing two-month lows at 4.257%, hurting chances of investments in the dollar.
Such developments came after bearish remarks from some Fed officials, which hurt the odds of another interest rate hike in the US at the Fed December meeting.
Fed Remarks
Fed member Christopher Waller, a usual hawk, said the Fed is on track to bring inflation back to the 2% target.
Fed Chicago President Austen Goolsbey said that inflation has slowed rapidly this year, while New York President John Williams lauded the recent drop in prices as monetary tightening measures bear fruit.
US Rates
Following the remarks, odds for a US interest rate hike at the December 13 meeting stood at just zero.
Odds for an interest rate cut by the Federal Reserve in March 2024 surged from 21.5% to 40%.
Growth Data
Now investors await US GDP growth data later today, expected to clock in a 5% growth rate in the second reading, up from 2.1% in the second quarter.
The SPDR
Gold holdings at the SPDR Gold Trust fell 1.73 tonnes yesterday to a total of 880.55 tonnes, the lowest since November 13.
Euro climbs above $1.1 for first time in three months
Euro rose in European trade on Wednesday against a basket of major rivals, extending gains for the fifth straight session against the dollar and trading above $1.1 for the first time in three months as concerns fade about the widening interest rate gap between Europe and the US.
Now investors await European inflation data for November to gauge the likely path ahead for the ECB monetary policies.
EUR/USD
EUR/USD rose 0.25% to 1.1017, the highest since August 11, with a session-low at 1.0990, after closing up 0.4% yesterday, the fourth profit in a row following bearish remarks by Federal Reserve officials.
Fed member Christopher Waller, a usual hawk, said the Fed is on track to bring inflation back to the 2% target.
Such remarks bolstered the case for an early interest rate cut by the Federal Reserve next year, reducing the interest rate gap with the European Central Bank.
Interest Rate Gap
The current US-European interest rate gap stands at 100 basis points, the lowest since May 2022, and it's expected to shrink further in the first half of 2024.
Most European Central Bank officials ruled out early interest rate cuts in 2024 amid efforts to maintain tight monetary conditions throughout 2024.
European Inflation Data
Later today, consumer prices data in Germany and Spain will be released, paving the way for euro zone inflation data tomorrow.
ECB President Christine Lagarde repeatedly asserted the importance of data in determining the path ahead for European monetary policies, as the central bank aims at 2% inflation rates.