The U.S. dollar index (DXY) rose by 0.21% today, bolstered by a 2% increase in WTI crude oil prices, which have raised inflation expectations and may lead the Federal Reserve to tighten monetary policy. The market is currently pricing in a 68% chance of a 25 basis point Fed rate hike at the next FOMC meeting on October 27-28. Concurrently, the September Dallas Fed manufacturing survey dipped by 1.8 to 9.8, which was a better result than the anticipated 7.8.
In Europe, the EUR/USD dropped 0.23% amid the dollar’s strength and negative implications from rising crude prices for the Eurozone economy. Comments from ECB President Christine Lagarde pointed to slower growth, leading markets to estimate a 37% chance of a 25 basis point ECB rate hike at their meeting on October 29. Meanwhile, the yen (USD/JPY) declined 0.06%, responding to speculation of potential coordinated intervention to support the currency due to recent comments from Japan’s top currency official, Atsushi Mimura.
In commodities, December COMEX gold fell by $148.80 (3.44%) and silver by $3.046 (4.70%), reaching 1.75-month lows. The strengthening dollar and rising inflation expectations, driven by crude oil prices, have negatively impacted precious metals. However, investor interest remains, as long holdings in gold and silver ETFs are at recent highs, and China’s gold reserves increased by 650,000 ounces to 76.73 million troy ounces in August, marking the largest rise in three years.
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