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On Thursday, the Dollar Index decrease -0.33%. That came mainly due to Federal Reserve Chair Powell’s statements earlier that day. Dovish hints at maintaining current interest rates at the upcoming Federal Open Market Committee meeting.
It is worth noting that the meeting is scheduled for October 31-November 1.
The dollar partly recovered as the 10-year Treasury note yield reached a 16-year high. Which led to strengthening the dollar’s interest rate differentials. Additionally, a drop in equity markets increased demand for the dollar as a safe haven for liquidity.
Initial reactions of Dollar Index decrease -0.33% situation
The economic indicators from the United States presented a nuanced perspective regarding the dollar’s performance.
September saw existing home sales decline by 2.0% month-on-month, hitting a 13-year low at 3.96 million units. Additionally, the October Philadelphia Fed business outlook survey fell by +4.5 to -9.0, dropping below the expected -7.0 level. Leading indicators for September showed a -0.7% monthly drop, worse than the expected -0.4%, marking the most significant decrease in four months. On a positive note, weekly initial unemployment claims unexpectedly dropped by -13,000, reaching an 8-3/4 month low of 198,000, indicating a stronger labor market than initially projected, as forecasts had predicted a rise to 210,000.
Also Read: Fed Chair Jerome Powell Suggests Potential Rate Increases Amid Strong U.S. Economy
Chair Powell’s statements on Thursday leaned somewhat dovish. He said, “Due to uncertainties and risks, and the significant progress we’ve achieved, the FOMC is proceeding cautiously. Decisions about the extent of further policy tightening and the duration of restrictions will depend on a thorough evaluation of incoming data, the evolving economic outlook, and the risk balance.”
Euro/US and US Dollar/Japanese Yen aimed Dollar Index decrease -0.33%
On Thursday, the Euro/US Dollar currency pair (EUR/USD) registered a gain of +0.47%.
The euro acquired upward momentum, primarily in response to Chairman Powell’s remarks.
Which exerted a dampening influence on the value of the dollar. Powell signaled the persistence of the pause in Federal Reserve rate.
He also hikes and underscored the Federal Reserve’s judicious approach in determining further policy tightening.
However, the economic developments on Thursday within the Eurozone cast a pall over EUR/USD. The French business confidence index for October receded by -2 points, declining to a 2-1/2 year nadir at 98, falling short of the projected level of 99.
The US Dollar/Japanese Yen currency pair (USD/JPY) experienced a decline of -0.08% on Thursday. The yen staged a recovery from a two-week low against the dollar, registering slight gains. This resurgence was substantiated by the Bank of Japan’s (BOJ) quarterly report. which conveyed an upgrade in economic assessments for several Japanese regions, signifying the highest level of confidence in over a year. Additionally, augmented Japanese government bond yields lent support to the yen, with the 10-year JGB bond yield reaching a decade-high of 0.851% on Thursday. Nevertheless, the yen’s gains were restrained by the escalating T-note yields, prompted by the 10-year T-note yield achieving a fresh 16-year pinnacle.
Gold update aim Dovish speech
On Thursday, December gold (GCZ3) concluded with an increment of +12.20 (+0.62%), whereas December silver (SIZ23) experienced a dip of -0.068 (-0.29%). Precious metal prices portrayed a mixed picture, with gold attaining a 2-1/2 month zenith. The dollar’s enfeeblement on Thursday had a constructive impact on precious metal valuations. Moreover, concerns regarding the Middle East conflict augmented the demand for precious metals as refuge assets. An escalation in inflation expectations also reinforced the demand for gold as an inflation hedge, especially subsequent to the 10-year U.S. breakeven inflation rate’s surge to a 7-1/2 month zenith. Chair Powell’s remarks, reiterating the Federal Reserve’s prudent approach to policy firming, contributed to this overarching outlook.
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Disclaimer:
Please note that this article serves solely for informational purposes. As such, it is not financial advice. We strongly advise readers to conduct thorough research and consult with financial professionals before making any investment decisions.
