Dollar Weakens Amid Political Shifts and Economic Data
Market Reactions to Polling and Interest Rate Outlook
The dollar index (DXY00) fell by -0.40% on Monday, marking a two-week low. Pressure mounted on the dollar following updated polls over the weekend that showed support rising for Democratic candidate Harris in the presidential race. Harris’s policies, which favor high taxes and low tariffs, are perceived to limit economic growth and inflation; this contrasts with Republican candidate Trump’s low-tax and high-tariff stance, which many see as more supportive of the dollar. Additionally, a decline in Treasury note yields contributed to weakening the dollar’s interest rate advantages. Expectations are also building that the Federal Open Market Committee (FOMC) will announce a 25 basis point rate cut during its meeting on Thursday, further impacting the dollar’s strength.
Factory Orders and Rate Cut Predictions
In economic reports, U.S. factory orders for September decreased by -0.5% month-over-month, aligning with analysts’ forecasts.
The market is assigning a 99% chance for a 25 basis point rate cut at the FOMC meeting on November 6-7, while the likelihood of a 50 basis point cut at that same meeting stands at 0%.
Euro Sees Gains as Dollar Declines
The EUR/USD (^EURUSD) rose by +0.42% on Monday, achieving a two-and-a-half week high. The euro received a boost from the falling dollar, supported by positive economic updates from the Eurozone. Specifically, the October manufacturing PMI was revised up by +0.1 to 46.0 from the preceding 45.9, and the November Sentix investor confidence index climbed +10.0 to reach a four-month high of -12.8, though this figure was shy of the expected -12.6.
Current swaps indicate a 100% likelihood for a 25 basis point rate cut by the European Central Bank (ECB) during its meeting on December 12, with a 19% possibility for a 50 basis point cut at that meeting.
Yen Strengthens Amid Market Conditions
The USD/JPY (^USDJPY) declined by -0.56% on Monday, with the yen climbing to a one-week high against the dollar. The drop in Treasury yields spurred short-covering in the yen. It’s worth noting that the thin trading conditions, due to Japanese markets being closed for Culture Day, may have amplified movements in the currency.
Precious Metals React to Market Dynamics
In the commodities market, December gold (GCZ24) closed down -3.00 (-0.11%), while December silver (SIZ24) fell by -0.072 (-0.22%). Precious metals lost ground after an early rise, with silver hitting a two-week low. Long liquidation pressures emerged ahead of Tuesday’s U.S. presidential election.
Initially, precious metals prices surged following the dollar index drop to a two-week low. The decrease in global bond yields also supported precious metals. Moreover, the anticipation of the Fed’s 25 basis point rate cut on Thursday heightened demand for these metals as safe-haven assets. Silver found additional support from a rally in copper prices, which reached a two-week high. Gold continues to attract investors seeking safety amid political uncertainty related to the presidential race and instability in Japan after the ruling LDP lost its majority in recent elections. Ongoing tensions in the Middle East further bolster demand for precious metals as secure investments.
More Precious Metal News from Barchart
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
