Forex News

Deutsche Bank’s Jim Reid describes severe stress in US Treasuries, with 10-year and 30-year yields pushing to post-2000s highs despite dovish PCE revisions. The report notes a relentless long-end selloff, rising real yields, and month-end positioning effects, as the bond rout that began with higher Oil and resilient growth continues to weigh on risk assets and fixed income.

Yields hit post-2000s peak levels

"The bond market stress continued, with the 10yr Treasury yield (+4.9bps) rising to another post-2007 high of 5.28%, whilst the Franco-German 10yr spread widened to a post-2012 high of 127bps."

"However, this dovish repricing didn’t hold further out the curve, with the 2yr Treasury yield closing +1.1bps higher on the day at 4.89% after trading as low as 4.825% after the PCE release."

"The 30yr yield (+6.3bps) saw an even bigger increase to a post-2002 high of 5.63%."

"The continued rise in yields saw equities soften after an initial post-PCE rally, before a further sharp fall in the final 15 minutes of trading left the S&P 500 -0.25% lower on the day despite trading +0.68% higher early on."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

According to UOB Global Economics & Markets Research, Gold spot eased to close at $4,157 per ounce after earlier trading as high as $4,219. Elevated real yields continue to limit bullion’s upside, leaving Gold softer despite broader macro uncertainty and strong moves in other commodities. The report underscores how higher US yields are constraining precious metals.

Bullion retreats from intraday highs

"Gold spot was softer at $4,156/oz as elevated real yields capped the bullion’s upside."

"Gold spot reversed earlier gains – which saw it trade as high as $4,219 /oz – to close 0.6% lower at $4,157/oz as elevated real yields continued to cap the bullion's upside."

"US headline PCE rose 0.3% m/m in Aug, in line with estimates, while the y/y rate fell to 3.4% from 3.7% in prior month. BEA methodology revisions improved the optics but did not materially alter the underlying inflation narrative."

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RaboResearch Global Economics & Markets highlights how the European Union is reshaping trade policy, including linking market access for Thai canned tuna to EU-caught fish and forging a new partnership with Canada on firefighting and critical minerals. The report raises questions over where these minerals will be processed, the design of subsidies and tariffs, and the need for downstream protection against cheaper Chinese imports.

EU shifts trade and minerals strategy

"For now, Canada is settling for a new partnership with the EU over firefighting, which seems appropriate, and critical minerals."

"Where will those minerals be (filthily) processed, what will the common subsidy and external tariff be to ensure they remain competitive vs. China’s cheaper imports?"

"The EU is also now playing the trade game differently: it’s reported Brussels is linking greater EU market access for Thai canned tuna to the fish being caught by EU, not Thai, fleets."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Deutsche Bank’s Early Morning Reid notes that softer US PCE revisions reduced expectations for an October Fed hike, even as the Dollar Index edged higher. The bank’s US economists see less urgency to act this month but still expect a December hike, with market pricing for year-end tightening nudged lower as core and headline PCE surprised on the downside.

PCE revisions temper Fed expectations

"So that played into the narrative from NY Fed President Williams on Tuesday, and it meant market pricing for an October hike was down from 47% on Tuesday to 37% by the close last night, while the amount of hikes priced by year-end fell by -2.5bps to 29.6bps."

"Indeed, our US economists see the print as reducing the urgency for the Fed to act in October but, with inflation still well above target, they maintain the expectation of the next hike in December (see their reaction here)."

"Admittedly, the core PCE print for August wasn’t far from expectations, at a monthly +0.25% (vs. +0.3% expected). But the significant news was the downward revisions to the previous months, which made the overall inflation picture look a lot better."

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• US futures indices remain mixed as investors sought fresh catalysts while monitoring high oil prices and soaring bond yields.
• Benchmark US Treasury yields hit multi-decade highs, with 10-year and 30-year yields reaching 5.33% and 5.67%.
• Easing PCE inflation metrics lowered October Fed rate hike expectations to 39%, shifting focus to Friday's jobs report.

Dow Jones futures decline by 0.42% to trade near 51,060 during European hours on Thursday. Meanwhile, S&P 500 futures gain by 0.09% to trade around 7,720, while Nasdaq 100 futures rise 0.51% to trade near 30,850.

US stock futures post mixed results as investors searched for fresh catalysts at the start of a new trading month, while markets continued to contend with elevated oil prices and rising Treasury yields. US Treasury yields climbed to 24-year highs amid growing concerns over persistent, energy-driven inflation that could prompt tighter monetary policy. The 10-year Treasury yield rose to 5.33%, while the 30-year yield reached 5.67%. Adding to these inflationary risks, oil prices remained elevated as the United States and Iran made little progress in negotiations, despite emerging signs of recovering Middle East supply flows.

During regular US trading on Wednesday, the Dow and S&P 500 fell 0.86% and 0.25%, respectively, while the Nasdaq Composite managed a 0.24% gain. Financial and industrial stocks dragged on the broader market as higher yields continued to weigh on sentiment.

Despite these headwinds, recent inflation metrics offered some relief. The August US Personal Consumption Expenditures (PCE) price index rose 0.3% month-over-month against a 0.4% forecast, while core PCE grew 0.2%, below the 0.3% consensus estimate. On an annual basis, headline PCE inflation decelerated to 3.4%, coming in significantly under the projected 3.7%.

Market attention now shifts to Friday’s US Nonfarm Payrolls report, with consensus estimates anticipating 90,000 jobs added in September and the unemployment rate holding steady at 4.1%. Additionally, investors are watching upcoming corporate earnings reports from Nike, McCormick, and Acuity Brands.

Rabobank’s RaboResearch Global Economics & Markets discusses rising political scrutiny of central banks. The report argues central banks are a key pillar of the political economy facing potential role changes.

ECB, Fed and BOE face rising scrutiny

"In Europe, PM Meloni is reported to be imploring EC President von der Leyen to let countries overspend to battle the current energy crunch, which the ECB will likely watch closely for its inflation impact, if so."

"Former Fed Chair and current FOMC voter Powell was cleared of criminal misconduct over $2.5bn renovations of the Fed building, but the report found “deficiencies” in his project leadership: is that OK for such a key role and large budget?"

"Former UK PM Truss gave an interview again claiming she was forced out of office by a liberal deep state that includes the Bank of England, which she’d threatened to reform."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Silver prices (XAG/USD) broadly unchanged on Thursday, according to FXStreet data. Silver trades at $60.48 per troy ounce, broadly unchanged 0.10% from the $60.42 it cost on Wednesday.

Silver prices have decreased by 14.92% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 68.81 on Thursday, broadly unchanged from 68.81 on Wednesday.

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ING’s Chris Turner notes the Dollar remains strongly supported, with the DXY index near its highs for the year as solid US activity data reinforces the Federal Reserve’s hawkish stance. He highlights resilient consumer spending, signs of accelerating payrolls and expectations for firm ISM readings.

DXY strength anchored by US data

"The DXY dollar index is testing the highs of the year at 101.80. Dollar debasement fears have been set aside for now as the cyclical story takes centre stage. Here the US economy is performing reasonably well and the market prices the need for the Fed to take policy into restrictive territory."

"Firming up the view that the Fed will need to tighten again has been the activity side, where consumer spending data is holding up and there are even signs that payroll growth is accelerating again – this from the monthly ADP report released yesterday. All eyes will once again be on tomorrow's September nonfarm payrolls release."

"Barring some breakthrough in US-Iran negotiations, it looks like the dollar will stay bid in October. For reference, DXY has appreciated in seven of the last 10 Octobers."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

MUFG’s Lee Hardman reports the Japanese Yen has weakened about 0.5% against the US Dollar, lifting USD/JPY to 158.44, after the Bank of Japan’s (BoJ) Summary of Opinions disappointed expectations for an October rate hike. Japanese rate markets have scaled back BoJ tightening pricing, with MUFG still expecting another hike in December. Rising Japanese rates should support the Yen over time, but global tightening complicates efforts to curb weakness.

BoJ expectations repriced, yen sold off

"The main trigger for the yen’s sell-off was the release of the Summary of Opinions from the latest BoJ policy meeting from 17th-18th September policy meeting. The Summary of Opinions appears to have disappointed some market participants who were looking for a stronger signal that the BoJ were open to another hike as soon as next month."

"It has prompted the Japanese rate market to scale back rate BoJ hike expectations."

"It fits with our view that another hike as soon as next month remains unlikely given that the BoJ had just sped up the pace of hikes this month and signalled that it is likely to continue hiking rates every three months."

"We expect another hike by the end of this year in December."

"The Summary of Opinions reiterated that underlying inflation is now getting closer to their 2.0% target, and the perspective of stabilizing it around 2.0% has become important in order to keep the risk of underlying inflation deviating upward to a level above the price stability target and thereby exerting an adverse impact on the economy afterward. It was for this reason that the BoJ considered there had been a shift in the phase of monetary policy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)