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The dollar index (DXY) rose by +0.17% today, driven by easing US-China trade tensions after President Trump stated optimism over the situation. Additionally, concerns regarding alleged loan frauds at Zions Bancorp and Western Alliance Bancorp appear contained, providing further support for the dollar. However, the ongoing U.S. government shutdown poses a bearish outlook for the dollar, with markets pricing in a 99% chance of a -25 basis point rate cut at the upcoming FOMC meeting on October 28-29.
The euro (EUR/USD) is down by -0.02%, pressured by a weaker-than-expected German producer price report, which showed a September decline of -0.1% month-over-month and -1.7% year-over-year. Additionally, S&P Global Ratings recently downgraded France’s sovereign debt credit rating from AA- to A+, citing elevated budget uncertainty. In contrast, swaps are currently pricing in only a 2% chance of a -25 basis point rate cut by the ECB at their October 30 policy meeting.
Precious metals surged today, with December COMEX gold up +2.45% and silver up +1.45%, as the U.S. government shutdown boosts demand for safe-haven assets. Gold ETF holdings reached a three-year high last Friday, while silver ETF holdings climbed to a 3.25-year high on Tuesday, indicating strong fund demand.
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