Market Watch: Dollar Extends Losses

Financial and commodity markets analytics

Powell is often referred to as dovish by the market, and this has led to a decline in rates and the dollar while increasing risk appetite. The dollar has been dragged down by the continued selling of the greenback against all major currencies. The US employment report due tomorrow may limit further dollar losses.
Gold would have been expected to be higher given the dollar's decline and lower yields. The yellow metal remains firm, but is below yesterday's peak near $1992.

Asia Pacific
Japan's economy seems to have contracted during Q3. Bank of Japan attempts to gradually end its extraordinary monetary policy. Reports suggest that this year the BOJ may set a new record for annual bond purchases.
The BOJ's decision clearly caused the yen to fall, and the MOF reiterated its threat of intervening in the foreign exchange markets.

Australia reported a smaller trade surplus for September. The A$6.79 billion surplus was about one-third smaller than expected, and the smallest surplus recorded since February 2022. Markets are focused on the central bank meeting next week. Reserve Bank of Australia (RBA) is considered to be one of the G10 central bank's most likely to increase rates.
The Fed's contrast with Australia helped boost the Australian dollar in North America to $0.6400 late last night.

The final manufacturing PMI for October in the Eurozone was 43.0. It rose to 43.1, but it is still lower than September's reading of 43.4. This is the lowest reading ever since the pandemic.
Norway's central banks left its deposit rate unchanged at 4.25%, as was widely expected. Next up is the Bank of England. The Bank of England will announce its decision shortly.

The euro reversed downwards from $1.0675 Tuesday and reached a bottom Wednesday just slightly above $1.0515. Today, follow through buying has lifted the euro back to nearly $1.0630 by the morning in Europe.
Yesterday, the range of sterling in North America was roughly between $1.2095 to $1.2165. Today, the range has been increased to nearly $1.2200.

The Federal Reserve remained steadfast for the second meeting in a row, as was widely expected. The market, as usual, heard a Chair who was dovish. According to the swaps and the futures markets, the Federal Reserve has finished. The market has also begun to discount a third rate cut in 2015, on top of two that the Fed announced with its dot plot back in September. The accompanying announcement was not much different from September. The statement acknowledged that Q3 GDP was strong. The statement also stated that, despite a slowdown in job growth, the trend is still positive.
ADP's private sector employment estimate is not very useful as a last minute input for nonfarm payroll forecasts. However, the wage data confirms the slowing in what some economists view as a source price pressure.

The modest increase in Canada's Manufacturing PMI (from 47.5 to 48.6) did little for the concerns that Canada may be experiencing a second consecutive quarter of contraction.
Yesterday, the Canadian dollar was behind other dollar-bloc currency. Yesterday, the greenback was as close as possible to CAD1,39, which is the highest for the year.