Dollar Falls and Gold Surges on Dovish Fed Comments
The dollar index (DXY00) today is down by -0.21% and posted a 1-week low. Dovish Fed comments today weighed on the dollar after Fed Governor Christopher Waller said the Fed can keep lowering interest rates to support a faltering labor market. Also, today’s economic news, which showed the October Philadelphia Fed business outlook survey fell more than expected to a 6-month low, was bearish for the dollar. In addition, the strength of the euro is undercutting the dollar, as EUR/USD climbed to a one-week high after French Prime Minister Lecornu survived two no-confidence votes.
Losses in the dollar are limited today after Richmond Fed President Tom Barkin said US productivity growth seems to be improving “significantly,” and after the Oct NAHB housing market index rose more than expected to a 6-month high.
The ongoing shutdown of the US government is bearish for the dollar. The longer the shutdown is maintained, the more likely the US economy will suffer, a negative factor for the dollar.
The US Oct Philadelphia Fed business outlook survey fell -36.0 to a 6-month low of -12.8, weaker than expectations of 10.0.
The US Oct NAHB housing market index rose +5 to a 6-month high of 37, stronger than expectations of 33.
Fed Governor Christopher Waller said the Fed can continue to lower interest rates in quarter-point increments to support a faltering labor market.
Richmond Fed President Tom Barkin said US productivity growth appears to be improving “significantly,” potentially mitigating any inflationary impacts from trade tariffs.
The markets are pricing in a 98% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29.
EUR/USD (^EURUSD) today is up by +0.21% at a 1-week high. The euro is climbing today as political risks in France eased after French Prime Minister Lecornu survived two no-confidence votes at France’s National Assembly. Hawkish ECB comments today also supported the euro after ECB Governing Council member Wunsch said the chances of additional ECB rate cuts have been receding. In addition, a weaker dollar today is positive for the euro.
ECB Governing Council member Wunsch said, “I would say that the probability that the ECB cuts interest rates again has been receding over the last few weeks or months.”
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