The USD was mixed in overnight trading against the major pairs with the balance tipping towards dollar weakness. The dollar index is -0.11% today, a welcome respite after yesterday’s volatile 1.51% drop, its second >1% daily drop this month, and at 104.08, is trading at a two-month low.
Yesterday’s lower-than-expected CPI data for October was the catalyst for the dollar’s selloff. Month-over-month CPI was reported 0.0%, below the 0.1% estimate and its lowest mark in 16 months (July of 2022). Year-over-year CPI was 3.2%, below the 3.3% estimate and the lowest reading since March. U.S. economic data has turned a corner this month, starting with Nonfarm payrolls surprise drop to 150k on Nov 3rd, followed by Friday’s Consumer Confidence dropping to 60.4 (63.7 estimate), and yesterday’s CPI. Add to this today’s PPI (producer prices data) for October which was below estimates in five of the six categories, and it seems clear that Fed rate policy is becoming a meaningful headwind for the U.S. economy.
U.S. Treasury yields are slightly higher today, a minor retracement from yesterday’s data-driven selloff. The 10-year yield is 4.50%, its lowest since September 22nd and nearly 50bps below the October high of 4.99%.
All the major global equity indexes are higher today, building on yesterday’s rally. Weakening U.S. economic data lessens the likelihood of another Fed rate hike, a bullish scenario for business owners.
Fed Funds Futures are now implying 0% chance of another Fed rate hike at any of the FOMC’s meetings through the end of next year. Before yesterday’s CPI data there was still a small likelihood of a hike at either the December or January rate policy meetings, but that has been replaced with the expectation of a series of rate cuts beginning with the FOMC’s March meeting.
Oil is lower by 0.88% today and is -3.34% YTD. Gold is +0.04% at $1,965.10/oz and is +7.74% YTD.