The United States Dollar starts the week with muted tones trading in slightly negative territory.
Overview
Yields on 10-year US Treasuries crossed the key 5% threshold early this morning for the first time since 2007, keeping volatility quite high on what many consider to be the world’s safest investment. Stock futures dropped this morning as well, but the Dollar did not gain as a result. Oil and gold prices retreated slightly from their highs Friday after reports that the US and its allies are ramping up efforts to delay an Israeli ground invasion of Gaza until after the 200-plus hostages currently held by Hamas are released. Geopolitical developments in the region will likely continue to be a driver of FX pricing for some time as riskier assets stay depressed and investors seek out safety.
Though the Federal Reserve is now entering its blackout period before the next policy decision on November 1, there are a few key data points due out this week that should provide more direction to the Dollar. PMI is due out Tuesday, followed by third-quarter GDP Thursday and the PCE Deflator index, the Fed’s preferred inflation gauge, Friday morning. The market consensus believes that US data will continue to run hot. Pricing for a potential final hike from the central bank has shifted more toward December as Fed speakers recently have included more “wait-and-see” language in their statements, but it’s important to re-emphasize that low odds of a hike do not mean zero chance, and the Fed remains very capable of a surprise.
What to Watch Today…
- US PMI Tuesday 9:45 AM
- Bank of Canada Rate Decision, Wednesday 10 AM
- European Central Bank Rate Decision, Thursday 8:15 AM
- US GDP Q3, Thursday 8:30AM
- US PCE, Friday 8:30 AM
- Monex USA Online is always open
JPY ⇓
Japanese Yen is one of very few currencies losing ground against the USD this morning, moving ever closer to prices that have previously prompted intervention from the nation’s governing bodies. Traders bet that the Bank of Japan will almost definitely end its negative interest rates by early next year, and continued JPY weakness could prompt a move sooner rather than later. Volatility, though, for the currency has decreased as of late as no one wants to be caught on the wrong side of any potential move from the Bank of Japan.
EUR ⇑
Ahead of the European Central Bank’s policy decision this week, the single currency is gaining ground slightly against USD, roughly 0.2% above Friday’s closing price. Eurozone PMIs are also due out tomorrow. The ECB has signaled that it is done hiking rates this cycle, though a small chance for a policy change in December does remain. As we enter the colder months in the region, energy prices will shift more toward the forefront of traders’ minds.
