The U.S. Dollar Index is -0.33% today and -0.44% for the week, jeopardizing the dollar’s run of nine consecutive weekly gains. Today’s dollar losses are the heaviest vs. the commodity currencies which are strengthening in unison with higher oil prices.
Today’s primary gains vs. the USD: NOK +0.67%, CAD +0.66%, AUD +0.50%, NZD +0.41%, SEK +0.38%, MXN +0.29%.
WTI Crude prices are +1.53% overnight and reached $93.01/barrel today, a 10-month high. Production cuts and higher demand over the last 4 months have lifted oil from $63.64/barrel, traded on May 4th, a 46% increase. Gasoline futures are +0.75% today and are now +10.38% YTD.
The FOMC starts its 2-day policy meeting today and culminates with tomorrow’s rate announcement at 2pm ET. Fed Funds futures are implying nearly a 0% probability (0.08%) of a rate hike tomorrow. The Fed has signaled its intention to allow time for the current 5.50% target rate to register its impact on inflation, so markets are looking now to November and December for additional rate hikes. Recent higher oil prices are an inconvenient development for the Fed, possibly jeopardizing the long-awaited ‘soft landing’ and will likely be a primary topic on today’s agenda.
U.S. Treasury yields are higher today in all tenors with the biggest gains centered around the 7-year +0.043. Yield on the benchmark 10-year is at 4.346%, very near the recent August high of 4.36%. A monthly close above 4.109% will mark the highest close in this tenor since 2007.