Market Watch: US Dollar is mixed

Financial and commodity markets analytics

Capital markets' reaction was overblown. The implied yield for the December 2024 Fed Funds futures dropped by 25 basis points, as if October's CPI were worth a quarter-point cut in rates next year. The US 2- and 1-year yields have risen by around 2 basis points today. The dollar is mixed with the most pressure on the euro and sterling. 

Biden will meet Xi today, and Biden will speak to the media late in the North American evening. 
US retail sales will likely confirm the idea that Q3's shopping spree was not sustainable. 

Gold is recovering due to soft yields and a weaker dollar. Today, it is moving above $1970. 
WTI December is regaining ground after yesterday's close to $80 per barrel.

Asia Pacific
The Japanese economy contracted more than anticipated. Bloomberg's median forecast was for a quarterly contraction of 0.1%, but instead, output dropped by 0.5% for an annualized rate of 2.1%. The Q2 growth was revised from 1.2 to 1.1%, or 4.5% annually. The net exports went from being a 1.8% contributor to the GDP in Q2 down to 0.1% in Q3. Unexpectedly, business spending continued to decline. 
The dollar's decline has ended a six-day rally versus the yen, and reinforced the feeling that the greenback is in danger near JPY152. 

The wage index in Australia rose by 1.3% in the third quarter after initially increasing by 0.9% in Q2. This is the biggest quarterly increase since the late 1990s. 
The Australian dollar surged over $0.6500. This had been a formidable figure for the last three months.

In October, headline inflation in the UK fell to 4.6% from 6.7% in Septembre. Separately the UK reported a deepening decline in input and output prices. The UK is expected ahead of the weekend to report an increase in retail sales of 0.5%, which if true would be the biggest increase in seven month. 

Eurostat confirmed yesterday that the eurozone's economy contracted by 0.1% during Q3. This makes the news from today about a 1,1% decline in industrial production in the Eurozone in September, redundant. 

The euro's appreciation of 1.7% against the dollar was its best day this year. For the first time since August, it closed above the 200 day moving average. The euro has been consolidating within a narrow band mostly above $1.0845. 
Sterling's best performance this year was a rise of 1.8%, pushing it above $1.2500. Today, sterling is trading below $1.25.

The October US CPI was a bit weaker than expected. This sent interest rates and dollar down, while stocks rose. 
US will report producer prices, but retail sales are the main focus. 

The US dollar continued to fall yesterday, falling below CAD1.3880. It then stabilized.