US dollar tightens its range following a rally to a new 11-week high.
US Dollar (USD) retraced somewhat on Tuesday after a brief rally on Monday that propelled the US Dollar Index (DXY), which measures the Greenback’s value against six major currencies, to a new 11-week high after US equities fell from their all-time highs. The US Treasury bonds are starting to sell down, and it looks that markets are starting to reprice their interest rates. Expectations for rate cuts are rising, with the Federal Reserve (Fed) likely to cut only once more this year before entering a wait-and-see mode.
US markets retreat further from all-time highs as the Fed may not reduce as much as previously expected.
On the US economic front, traders will have a fairly light calendar to absorb on Tuesday. One takeaway from Fed speakers is that there is a clear divergence in opinions within the Federal Open Market Committee (FOMC), with Atlanta Fed President Raphael Bostic pleading for no more rate cuts this year and San Francisco Fed President Mary Daly commenting on Monday that the Fed should continue its rate-cutting cycle and ease further. Market players are eager to hear what Philadelphia Fed President Patrick Harker has to say on the topic on Tuesday, around 14:00 GMT.
Daily market movers: Fed is becoming spread, US Dollar index trades in a narrow range on Tuesday, failing to break above 104.00.
At 14:00 GMT, Federal Reserve Bank of Philadelphia President Patrick Harker opens the Eighth Annual Fintech Conference, hosted by the Federal Reserve Bank of Philadelphia.
While Harker delivers his address, the Richmond Fed Manufacturing Index for October will be announced at 14:00 GMT. Analysts estimate the number to stay in contraction at -18, somewhat better than -21 in September.
Asian equities are again lethargic, with Japan’s main indices closing nearly -1% lower. European shares are flat to slightly higher, while US equity futures are modestly negative.
The CME Fedwatch Tool still supports a minor 25 basis point (bps) rate drop with an 87.0% chance against a 13.0%.There is a potential that the Fed will not decrease interest rates at its forthcoming meeting on November 7.
The US 10-year benchmark rate is 4.20% and rose significantly on Monday as bonds sold off. When bond prices decline, the inverted yield rises.
