- Bullish remarks from Fed Chair Jerome Powell
- Receding odds of a 0.5% US interest rate cut
- Markets await evidence on US rate cuts
The US dollar rose in European trade on Wednesday against a basket of major rivals, maintaining the gains for the third straight session and trading near two-week highs, as the odds of a heavy 0.5% Fed rate cut in November receded.
Now markets await important US private sector employment data later today for September.
The Index
The dollar index rose 0.1% today to 101.31, with a session-low at 101.16.
The index closed up 0.45% on Tuesday, marking two-week highs at 101.39 against a basket of major rivals.
Powell
Fed Chair Jerome Powell was bullish in a Tennessee speech earlier this week, noting the Fed is likely to commit to 0.25% rate cuts in the future, and there’s no rush to cut interest rates.
According to the Fedwatch tool, the odds of a 0.5% Federal Reserve interest rate cut in November stood at 39%, with a 61% chance of a 0.25% rate cut.
It comes ahead of important US private sector employment data, followed by the crucial US payrolls report on Friday.
The ADP index for private sector employment is expected to show the addition of 124 thousand new jobs last month, up from 99 thousand in August.
- Precious metal backs off record high
- Stronger dollar weighs on gold
Gold prices fell in European trade on Wednesday, resuming the decline away from record highs amid active profit-taking, while the stronger dollar heaps pressure on the precious metal.
Recent bullish remarks from Fed Chair Jerome Powell reduced the odds of a 0.5% US interest rate cut in November, with investors now waiting for crucial US labor data later this week.
Prices
Gold prices rose 0.7% today to $2644 an ounce, with a session-high at $2663
On Tuesday, gold rallied 1.1%, resuming the gains and approaching a record high at $2685.
The gains were sustained by strong haven demand after Iran launched missile strikes against Israel, triggering concerns about a wider war in the Middle East.
The Dollar
The dollar index rose 0.1% on Wednesday, and maintained the gains for the third straight session, thus approaching two-week highs at 101.39 against a basket of major rivals.
Powell
Fed Chair Jerome Powell was bullish in a Tennessee speech earlier this week, noting the Fed is likely to commit to 0.25% rate cuts in the future, and there’s no rush to cut interest rates.
According to the Fedwatch tool, the odds of a 0.5% Federal Reserve interest rate cut in November stood at 39%, with a 61% chance of a 0.25% rate cut.
It comes ahead of important US private sector employment data, followed by the crucial US payrolls report on Friday.
The SPDR
Gold holdings at the SPDR Gold Trust rose 2.88 tonnes yesterday to a total of 874.82 tonnes.
- Japanese Diet elects Shigeru Ishiba as a new PM
- US yields rebound, putting pressure on yen
Yen lost ground in Asian trade on Wednesday against a basket of major rivals, resuming the losses as investors focus on fundamental factors despite mounting haven demand due to geopolitical tensions in the Middle East.
Japan’s Diet chose Shigeru Ishiba as the new Prime Minister of the government, and he took a moderate position on monetary and financial policies.
Yen is also weighed on by higher US 10-year treasury yields before crucial US labor data later this week.
The Price
The USD/JPY pair rose 0.45% today to 144.18 yen per dollar, with a session-low at 143.42.
The yen rose 0.1% against the dollar yesterday after losing over 1% on profit-taking off two-week highs at 141.64.
Geopolitical Tensions
Israel said that Iran launched over 180 ballistic missiles at its territory, with Iran’s Revolutionary Forces saying the attack is a response to Israel’s assassination of Ismael Heniyeh and Hassan Nasrallah.
There were no reports of injuries in Israel, and it comes after a similar Iranian attack in April that didn’t leave a lasting damage or impact on the financial markets.
Israel has just begun its ground attack on southern Lebanon, with the government vowing severe punishment and retaliation for any attack on its citizens.
Shigeru Ishiba
Japan’s Diet voted for Shigeru Ishiba, the leader of the Democratic Liberal Party, as the new Prime Minister, as the country faces considerable economic challenges and increasing security risks.
After his win of the leadership bid in the governing party, Ishiba said that monetary policies should remain easy and supportive given current conditions.
US Yields
US 10-year treasury yields rose by over 0.3% away from two-week lows at 3.698%, which underpins the dollar against main rivals.
It comes ahead of important US private sector employment data, followed by the crucial US payrolls report on Friday.
According to the Fedwatch tool, the odds of a 0.5% Federal Reserve interest rate cut in November stood at 39%, with a 61% chance of a 0.25% rate cut.
US stock indices lost ground on Tuesday as October opens up after marking strong gains in both September and the third quarter.
Now markets are shifting their focus to the US presidential elections in November, and the Federal Reserve’s multiple policy meetings left this year, which could conclude with another 0.5% interest rate cut.
Investors are also keeping an eye on the union strike at the international ports in the eastern US coast and the Gulf coast, which could hinder the flow of trade in the country and lead to billions of losses.
Another item of considerable interest for the oil market is the news of an imminent missile attack by Iran against Israel, which would raise tensions in the Middle East and threaten a wider war.
On trading, Dow Jones fell 0.4% as of 15:37 GMT to 42,163, while S&P 500 fell 1% to 5704, as NASDAQ shed 1.8% to 17,870.
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