Dollar Retreats with T-Note Yields Ahead of Tuesday’s US Presidential Election

The dollar index (DXY00) Monday fell by -0.40% and posted a 2-week low. The dollar was under pressure Monday after updated polls over the weekend shifted in favor of Democratic candidate Harris for president.  Harris’s high-tax and low-tariff policies are seen as limiting growth and inflation and are seen as more negative for the dollar than Republican candidate Trump’s low-tax and high-tariff policies.  Also, a decline in T-note yields on Monday weakened the dollar’s interest rate differentials. In addition, expectations that the FOMC will cut interest rates by 25 bp on Thursday undercut the dollar. 

US Sep factory orders fell -0.5% m/m, which is right on expectations.

The markets are discounting the chances at 99% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

EUR/USD (^EURUSD) Monday rose by +0.42% and posted a 2-1/2 week high. The slumping dollar on Monday boosted the euro.  The euro also garnered support from Monday’s economic news that showed an upward revision to the Eurozone Oct manufacturing PMI and an increase in the Eurozone Nov Sentix investor confidence index to a 4-month high.   

The Eurozone Oct manufacturing PMI was revised upward by +0.1 to 46.0 from the previously reported 45.9.

The Eurozone Nov Sentix investor confidence index rose +10. to a 4-month high of -12.8, although weaker than expectations of -12.6.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 19% for a -50 bp rate cut at the same meeting.

USD/JPY (^USDJPY) Monday fell by -0.56%.  The yen Monday rallied to a 1-week high against the dollar.  Monday’s decline in T-note yields sparked some short covering in the yen.  Thin trading conditions on Monday may have exaggerated moves in the yen with Japanese markets closed for the Culture Day holiday.

December gold (GCZ24) Monday closed down -3.00 (-0.11%), and December silver (SIZ24) closed down -0.072 (-0.22%).  Precious metals Monday gave up an early advance and closed modestly lower, with silver posting a 2-week low.  Long liquidation pressures emerged in precious metals Monday ahead of Tuesday’s US presidential election.

Precious metals initially moved higher on Monday after the dollar index fell to a 2-week low.  Also, Monday’s slide in global bond yields was supportive of precious metals.  In addition, expectations for the Fed to cut interest rates by 25 bp on Thursday boosted demand for precious metals as a store of value.  Silver had some carryover support from Monday’s rally in copper prices to a 2-week high.  Gold continues to benefit from safe-haven demand due to political uncertainty ahead of Tuesday's US presidential election.  Also, there is Japanese political uncertainty after the ruling LDP lost its majority in the lower house in this past weekend's election. Finally, the ongoing hostility in the Middle East continues to boost safe-haven demand for precious metals. 

More Precious Metal News from Barchart

• Stocks Waver Before This Week’s US Election and FOMC Meeting
• Dollar Slips on Swings in US Election Polls and Fed Rate Cut Expectations
• Stocks Under Pressure Ahead of Tuesday’s Election and FOMC Meeting
• Dollar Recovers as Bond Yields and Equities Push Higher

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.