Dollar and U.S. 10-Year Treasury Fall at the Start of This Momentous Week – Currency Thoughts
Dollar and U.S. 10-Year Treasury Fall at the Start of This Momentous Week
November 4, 2024
The weighted DXY dollar index fell 0.6% overnight to a two-week low. That’s an atypically large daily move by recent standards. The outlook of tomorrow’s U.S. presidential and congressional election remains highly uncertain, with candidates projecting wholly divergent visions on a wide range of issues. Due to the election, this week’s scheduled Federal Reserve review of U.S. monetary policy occurs on Wednesday-Thursday, rather than the normal Tuesday-Wednesday, and the consensus in the market is that the interest rate target will be lowered 25 basis points.
Against specific currencies, the dollar today is so far down by 0.8% against the yen and Swiss franc, 0.7% vis-a-vis the euro, 0.6% versus the Australian dollar, and 0.4 relative to the Canadian dollar, New Zealand dollar, Chinese yuan, and sterling. In contrast to the aforementioned big drop in long-term interest rates today, other 10-year sovereign debt yields are generally steady.
Japan’s stock market was closed for Culture Day. In other equity markets around the Pacific Rim, those in China, South Korea, Taiwan and Singapore are up 1.2%, 1.8%, 0.8% and 0.5%, while India and Indonesia have experienced drops of 1.2% and 0.3%. European share prices, aside from the steady German DAX, are modestly firmer, and U.S. stock futures show scant overnight change.
The prices of Bitcoin and Comex gold each edged up 0.1%.
In contrast, the cost of West Texas Intermediate crude oil leaped 3.1% following this month’s decision by OPEC Plus not to announce a production hike just yet, but to defer such a vote at least one more month. In Iran, where 45 years ago today radicals overran the U.S. embassy and took staff there hostage, the government has promised strong and complex retaliation against Israel, disappointing hopes that a deescalation might be possible.
Latest U.S. opinion polls suggest some momentum toward Harris over recent days, perhaps simply reflecting more early voting by Democrats than Republicans. The two parties’ totals remain within the margin of error, and a further source of uncertainty comes from reports that the congressional results may not be known until the end of the week and that the contest between Harris and Trump may take weeks to call. One surprising finding in a poll reported over the weekend is that Harris appears ahead in Iowa. Nationally Harris is doing historically well among women compared to men, but the Republicans continue to make inroads among Latinos and young blacks.
One of the few election certainties is that under no circumstances will Trump concede defeat, seen by him as tantamount to surrender, either this week or ever, and court maneuvers are already prepared by his side to contest the outcomes in numerous states. There is a strong risk of violence if he is not declared the winner and soon.
The volatility in financial markets this Monday has not been data-driven. Indicator releases have been on the light side, limited mainly to a few more manufacturing purchasing managers surveys and few inflation reports.
Euroland’s revised October PMI for manufacturing is a 5-month high of 46.0, 0.1 point above the preliminary estimate and above 45.0 in September and three straight scores of 45.8 in June, July and August. This latest reading connotes a significant but not deepening recession in the factory sector and included disappointing properties such as slower delivery times, an ongoing run-down of inventories, and a squeeze on profits. Inflation continued to subside.
Among members of the joint currency area, a gap widened between Spain, Ireland and Greece — each of which had higher readings than in September and above the 50 neutrality level — and other economies whose readings ranged between 42.0 in Austria and 47.0 in the Netherlands. In four of those five instances (excepting Germany’s 43.0, a 3-month high), the reading for October was lower than that in September.
India’s manufacturing PMI got revised upward from 57.4 to a 2-month high of 57.5. The report also signaled stronger input price inflation and greater confidence about the 1-year outlook.
In the Philippines, the manufacturing PMI fell 0.8 points from September’s 27-month high to a 2-month low in October of 52.9. Inflation moved higher.
Poland‘s manufacturing PMI stayed below the 50 threshold but, at 49.2, was its best reading in 30 months. Input price inflation eased to a 1-year low.
The downtrend of in Turkish consumer price inflation from a peak of 85.5% in October 2o22 to a 6-month high of 75.5% this past May extended to a 15-month low of 48.6% in October. Producer price inflation in that economy, which peaked at a hyperinflationary 157.7% in October 2022, receded to a 43-month low of 32.2% in October. “Hyperinflationary” is not merely a pejorative label, but rather a technical term used by economists whenever inflation exceeds 100%, a seldom occurrence to say the least.
At a far different point on the spectrum, the Euro-Asian country of Georgia saw CPI inflation of 0.3% in October, half of September’s pace and well down from the 128-month high of 13.9% in January 2022.
Romanian producer price inflation, which crested at 51% in August 2022, fell 1.7% year-on-year in September 2023.
The Chinese National People’s Standing Congress began today in meetings that will extend all week, and which investors hope will result in approval of a forceful fiscal stimulus of perhaps more than $1.0 trillion dollars equivalent. This possibility has lifted China’s stock market.
The Sentix gauge of investor confidence toward Euroland’s economy printed below zero again but, at -12.8, by the least amount since July. June’s reading of +0.3 was the only one above zero since Russia invaded Ukraine in February 2022. The high water mark in the post-Covid period was +29.8 in July 2021.
Copyright Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland manufacturing PMI, Turkish CPI and PPI, U.S. election
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