The dollar index (DXY00) on Wednesday fell from a 1-week high and finished down by -0.04%.  The dollar relinquished early gains on Wednesday and turned lower after a Reuters report stated that the Trump administration is considering broad restrictions on exports to China made with US software in retaliation for China's latest round of rare earth export restrictions.  The ongoing shutdown of the US government is also bearish for the dollar.  The longer the shutdown is maintained, the more likely the US econ ...

The dollar index (DXY00) today is up by +0.07% at a 1-week high.  Weakness in the British pound today is a supportive factor for the dollar after a weaker-than-expected UK Sep CPI report knocked (GBP/USD) down to a 1-week low.   The dollar also has carryover support from Monday, when US-China trade tensions eased after President Trump said, "I think we're going to be fine with China."  Gains in the dollar are limited as the ongoing shutdown of the US government is bearish for the dollar. The longer the s ...

Group 1: Dollar Index and US Labor Market - The dollar index (DXY00) recovered from early losses and is up by +0.23%, supported by higher T-note yields which strengthened the dollar's interest rate differentials [1] - The dollar initially declined due to the US government shutdown and signs of weakness in the labor market, with a report indicating that US employers have cut the most jobs this year since 2020 [2] - US September Challenger job cuts fell by 25.8% year-on-year to 54,064, with a total of 946,426 job cuts announced this year, the highest for the same period since 2020 [3] Group 2: Eurozone Economic Indicators - The EUR/USD pair is down by -0.17%, influenced by the dollar's rebound and an unexpected increase in the Eurozone's August unemployment rate [4] - The Eurozone's August unemployment rate rose by +0.1 to 6.3%, indicating a weaker labor market than expected [5] - ECB Governing Council member Kazaks stated that current ECB interest rates are appropriate, suggesting a pause in rate cuts [6] Group 3: Japanese Yen and Economic Outlook - The USD/JPY pair is up by +0.09%, with the yen losing overnight gains as T-note yields rose [7] - The Japanese consumer confidence index for September rose to a 9-month high, initially supporting the yen [7] - BOJ Deputy Governor Uchida indicated that the BOJ will continue to raise interest rates if the economic outlook improves, pushing the Japanese 10-year bond yield to a 17-year high of 1.674% [7]

Core Points - The dollar index fell by -0.31% from a one-week high, influenced by expectations of easier Federal Reserve policy and a potential 50 basis point interest rate cut this year [1] - Support for the dollar was provided by hawkish comments from several Federal Reserve presidents, indicating limited room for further interest rate cuts [1][3][4] Group 1: Federal Reserve Outlook - The Federal Open Market Committee (FOMC) is expected to cut interest rates by another 50 basis points this year, with a 90% chance of a 25 basis point cut at the next meeting on October 28-29 [1][4] - St. Louis Fed President Alberto Musalem noted limited room for additional rate cuts due to elevated inflation, suggesting current rates are "between modestly restrictive and neutral" [3] - Atlanta Fed President Raphael Bostic expressed concerns about elevated inflation, stating he does not foresee inflation returning to 2% until 2028 [3] Group 2: Dollar Weakness and Market Reactions - Concerns over the independence of the Federal Reserve, particularly regarding President Trump's attempts to influence Fed governance, may lead foreign investors to sell dollar assets [2] - The euro gained strength, rising by +0.43%, supported by dollar weakness and positive developments such as Fitch Ratings upgrading Italy's sovereign credit rating [5] - Central bank divergence is evident, with the European Central Bank (ECB) seen as nearing the end of its rate-cut cycle, while the Fed is expected to implement further cuts [6]

Core Viewpoint - The dollar index is experiencing downward pressure due to expectations of easier Federal Reserve policy, with a potential interest rate cut of 50 basis points anticipated this year [1][2]. Group 1: Federal Reserve Outlook - The dollar index (DXY00) fell by -0.12% from a one-week high, influenced by the outlook for easier Fed policy [1]. - The FOMC is expected to cut interest rates by another 50 basis points this year, with a 92% chance of a -25 basis point cut at the next meeting on October 28-29 [4]. - St. Louis Fed President Alberto Musalem and Atlanta Fed President Raphael Bostic expressed limited room for further rate cuts due to elevated inflation concerns [3][4]. Group 2: Market Reactions - The euro is gaining support from the dollar's weakness, with EUR/USD rising by +0.19% [4]. - Fitch Ratings upgraded Italy's sovereign credit rating, which positively impacted the euro [4][5]. - The Eurozone's September consumer confidence index rose by +0.6 to -14.9, exceeding expectations [5]. Group 3: Currency Movements - The USD/JPY pair decreased by -0.03%, with the yen recovering from a two-week low due to a weaker dollar [6]. - Higher Japanese government bond yields, reaching a 17-year high of 1.670%, have strengthened the yen's interest rate differentials [6].

Group 1: Dollar Index and Market Reactions - The dollar index (DXY00) is up by +0.07%, with modest gains observed ahead of the FOMC meeting results [1] - Weakness in stocks is increasing liquidity demand for the dollar, although gains are muted following disappointing housing data [1] - The market is pricing in a 100% chance of a -25 basis point (bp) rate cut at the FOMC meeting, with an 86% chance of a second -25 bp cut at the next meeting [5] Group 2: Housing Market Data - US August housing starts fell by -8.5% month-over-month (m/m) to 1.307 million, below expectations of 1.365 million [4] - Building permits for August unexpectedly fell by -3.7% m/m to a 5.25-year low of 1.312 million, contrary to expectations of an increase to 1.370 million [4] Group 3: Federal Reserve and Interest Rate Expectations - The dollar is under pressure due to expectations for the Fed to cut interest rates by -25 bp at the conclusion of the FOMC meeting [2] - Concerns over Fed independence may lead to foreign investors selling dollar assets, particularly in light of political tensions surrounding Fed leadership [3] - The markets are anticipating an overall -69 bp cut in the federal funds rate by year-end, reducing it from the current 4.33% to 3.64% [5] Group 4: Eurozone Economic Indicators - The euro is down by -0.09% as the strength of the dollar weighs on it, compounded by a downward revision to Eurozone August CPI [6] - Eurozone August CPI was revised lower to +2.0% year-over-year (y/y) from +2.1% y/y, while core CPI remains unchanged at +2.3% y/y [7] - Swaps indicate a 2% chance of a -25 bp rate cut by the ECB at the upcoming policy meeting [7]

Group 1 - The dollar index fell by -0.69%, reaching a 2.5-month low, primarily due to expectations of a -25 basis point interest rate cut by the Fed [1] - US retail sales in August rose by +0.6% month-over-month, exceeding expectations of +0.2%, while retail sales excluding autos increased by +0.7% month-over-month, stronger than the anticipated +0.4% [3] - The markets are pricing in a 100% chance of a -25 basis point rate cut at the upcoming FOMC meeting, with an overall expectation of a -68 basis point reduction in the federal funds rate by year-end [5] Group 2 - Concerns over Fed independence are affecting the dollar, as President Trump attempts to fire Fed Governor Cook, which may lead foreign investors to sell dollar assets [2] - The euro rose by +0.88%, reaching a 4-year high, supported by dollar weakness and central bank divergence, with the ECB seen as nearing the end of its rate-cutting cycle [6] - The US manufacturing production unexpectedly increased by +0.2% month-over-month, contrary to expectations of a -0.2% decline [3]

Currency Market - The euro rose by +0.03% after hawkish comments from ECB officials, indicating a potential end to the rate-cut cycle, contrasting with expectations of multiple rate cuts by the Fed [1] - The dollar index increased by +0.04% due to higher T-note yields, but fell back after a decline in consumer sentiment [5] - USD/JPY rose by +0.22% as political uncertainty in Japan and a commitment from US and Japanese officials to let markets determine currency rates reduced safe-haven demand for the yen [7][9] Inflation and Economic Sentiment - The University of Michigan's 1-year inflation expectations remained at +4.8%, while 5-10 year expectations rose unexpectedly to +3.9% [3] - The consumer sentiment index fell to a 4-month low of 55.4, indicating weaker consumer confidence than expected [3] Precious Metals - December gold closed up +0.35%, and silver rose +1.62%, supported by expectations of Fed rate cuts and increased geopolitical risks [10][11] - Gold prices are bolstered by central bank purchases, with China's PBOC increasing its gold reserves for the tenth consecutive month [11] - Political uncertainties in France and Japan are driving demand for gold as a safe-haven asset [12]

Group 1: Eurozone Economic Outlook - The euro is gaining strength after the ECB maintained interest rates and raised its 2025 Eurozone GDP forecast to +1.2% from +0.9% [1][5] - ECB President Lagarde indicated that the disinflationary process is over, suggesting that the ECB is done cutting interest rates [1][5] Group 2: US Economic Indicators - US August CPI increased to +2.9% year-on-year, up from +2.7% in July, aligning with expectations [3] - Weekly initial unemployment claims rose unexpectedly by +27,000 to a 3.75-year high of 263,000, indicating a weaker labor market [3][4] Group 3: Federal Reserve Rate Expectations - Markets are pricing in a 100% chance of a -25 basis point rate cut at the upcoming FOMC meeting on September 16-17, with an overall expectation of -73 basis points by year-end [2][4] - The dollar index is down by -0.24% due to rising expectations for Fed easing and the strength of the euro [4] Group 4: Precious Metals Market - Gold prices are under pressure due to the ECB's unchanged interest rates and reduced safe-haven demand from stock market strength [9] - However, gold prices are supported by geopolitical risks in Europe and increased gold purchases by China's central bank, which rose by +0.06 million troy ounces in August [10][11] Group 5: Japanese Economic Conditions - The yen is strengthening following positive economic news, including an increase in Q3 BSI large manufacturing business conditions and August producer prices [7][8] - Political uncertainty in Japan may limit the yen's gains, as the resignation of Prime Minister Ishiba could lead to more expansionary fiscal policies [8]

Group 1 - The dollar index (DXY) recovered from a 1.5-month low, rising by +0.36% due to higher T-note yields strengthening interest rate differentials and sparking short covering in the dollar [1] - Preliminary benchmark payroll revisions indicated a loss of -911,000 jobs through March 2025, exceeding expectations of -700,000, signaling a weaker US labor market [3] - Markets are now pricing in a 9% chance of a 50 basis point rate cut at the upcoming FOMC meeting on September 16-17, with a 75% chance of a second -25 basis point cut at the October 28-29 meeting, leading to an overall -73 basis point cut in the federal funds rate by year-end [4] Group 2 - The EUR/USD fell by -0.50% due to a rebound in the dollar, with the euro pressured by a significant decline in French manufacturing production [5] - French July manufacturing production decreased by -1.7% month-over-month, worse than the expected -1.2% and marking the largest decline in 14 months [6]