Market Recap: Dollar slumped; Gold & Oil supported on rising Fed rate cut bets

Economic Indicators & Central Banks :

US consumer confidence improved better than expected, but it follows big downward revisions to October.  The consumer confidence rise joins a Michigan sentiment decline to a 6-month low. All the surveys face headwinds from elevated mortgage rates, tight credit conditions, and fears about developments in the Middle East.
Fed’s Waller (the most hawkish Fed) &  Goolsbee are “increasingly confident” that policy is well positioned to slow the economy and get inflation back to 2%. BUT Fed Governor Bowman reiterated she favors more rate hikes if the progress on inflation stalls.
The RBNZ warned this morning that further policy tightening might be needed if price pressures did not ease.
German import prices unexpectedly rose 0.3% m/m in October. However, annual import price inflation seems to have bottomed out in August and the trend of ever deeper deflation has been reversed now.

Market Trends

Fed funds futures rallied on the dovish read. Implied rates popped to suggest about a 70% chance for a rate cut as soon as the May 1 policy meeting, versus about a 55% risk a week ago. However, a significant downturn in growth could spark the more aggressive easing posture as the market is reflecting.
Treasury bulls took less than hawkish Fedspeak and ran with it. Short term bond yields dropped sharply, to the lowest since July and August.
Stocks in Asia and US are fractionally higher after a mixed trade most of the session, as Treasury yields and USD hit multi-month lows. JPN225 fell at 33,321 as investors continue their pause in buying.

Financial Markets Performance:

The US Dollar bears chased the Buck lower. USDIndex fell to 102.36, the weakest since August. – Its worst monthly performance in a year!
EURUSD broke 61.8% Fib level on July-September downleg, breaching1.1016. Cable is at 1.2730.
USDZAR extended to 18.51 lows, JPY jumped to its strongest point since mid-September at 146.66. The NZD surged more than 1% to July’s high of 0.6207.
USOIL & Gold climbed to $77 from $74 lows, and to $2051.93 per ounce, the highest since May, respectively.  The weaker US Dollar, global uncertainties, and rising Fed rate cut bets supported Gold and Oil.

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Andria Pichidi

Market Analyst

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