ACY Securities

The Dollar Index, which gauges the value of the Greenback against a basket of 6 major currencies eased after Federal Reserve President Jerome Powell said that the next policy step would be data dependent. The USD/DXY was steady at 106.25, off its overnight high at 106.67.

The US dollar has maintained its strength in overnight trading, bolstered by increasing US yields observed yesterday. The sell-off in the US Treasury market has regained momentum, propelling the 10-year yield closer to 5.00% for the first time since July 2007.

The global GDP growth is expected to decelerate, reaching 2.9% this year (which is in line with my previous estimate of 2.8%) and 2.5% next year (down from 2.7%). This slowdown is primarily due to the delayed effects of tighter monetary policies, decreased household savings, and reduced fiscal support.

The recent price action in the foreign exchange market has been quite intriguing. Despite the release of a robust US retail sales report and a surge in US yields, the US dollar unexpectedly weakened. This deviation from the usual market response has raised eyebrows

Robust US Retail Sales in September, up 0.7%, beating forecasts at 0.3% initially boosted the Dollar Index (USD/DXY) to 106.53, before dipping lower to finish at 106.20.

On the start of the European trading session, brought forth significant economic data, with the spotlight on the latest labour market report from the UK. This report has unveiled some encouraging news for the Bank of England (BoE) as it indicates a moderation in the pace of average weekly earnings growth.

In September, a significant drop in the 2-year rate differential between the United Kingdom and the United States had profound implications for the performance of the Pound (GBP) within the G10 currency spectrum.

Over the past few weeks, the USD faced some challenges, witnessing a decline from its peak of 107.35 on October 3rd, though this setback remained relatively modest in scale. The dollar index experienced a continuous descent for six consecutive days from October 3rd to 10th, eventually reaching a low of 105.54.

The recent release of macroeconomic data last week has rekindled expectations for another increase in interest rates, in line with the current official guidance from the Federal Open Market Committee (FOMC).

Elevated inflation in the United States did not boost risk appetite, despite the S&P 500 showing an initial lack of negative response to the increased CPI reading and higher yields. However, it appears that another lacklustre UST bond auction served as the catalyst for a sustained sell-off.

Oil Prices and Gold soared while the Swiss Franc outperformed as Middle East tensions escalated. Bond yields tumbled while Wall Street stocks slid. The Dollar Index, which weighs the value of the Greenback against a basket of 6 major currencies, steadied to 106.65 (106.57).

Yesterday, the European Central Bank unveiled the findings from its latest consumer expectations report. The report indicated a slight uptick in inflation expectations for August.