DXY Financial News

A partial U.S. government shutdown seems to be looming and global economic ructions are being heard again, but gold isn’t catching the usual safe-haven bid because ‘King Dollar’ isn’t allowing it.

Economic data released earlier on Friday revealed a larger-than-expected slowdown in the US jobs market in October, triggering downside in US bond yields and a pump in the US stock market and price of Bitcoin (BTC), which was last around $34,600.

By Vidya Ranganathan

In the lead-up to last week, the US Dollar Index experienced some weakening as the Federal Reserve adopted a more dovish stance. This trend coincided with escalating geopolitical risks in the Middle East, which were expected to intensify over the weekend.

Investing.com — Gold bulls have been reminded again that it’s hard to put the dollar down for too long.

Global markets are kicking off the week with heightened volatility, fueled by escalating tensions between Israel and Palestine, which have now reached a level of official war.

Treasury yields surged to yet new yearly highs this morning after the nonfarm payrolls report showed that the US economy added far more jobs in September than economists expected. As of this writing, the 10-year yield is up 2.5%, further steepening the 10-2 yield curve.

Ajit Dayal, Founder, Quantum Advisors, says “unlike China, India has a one-to-one correlation between stock market returns and GDP. When GDP grows, stock market returns grow. In China, that correlation broke about eight-nine years ago and it is not likely to go back given that strong leadership and strong governments who think too much of themselves are dangers to stock market returns. They may not be dangerous to GDP growth rate because strong governments or strong leaders can encourage crony capitalism. We have seen that in Russia and China. Therefore, we pray for coalition governments in some sense because then you have automatic risk management.” Today is an interesting day because the Nifty after going to almost 19,200 or thereabout has come back to 19,600-19,700. There was a fear in the market that this change in global narrative of higher for longer which our Governor Das also alluded to today, is likely to dislocate markets globally. Since India has relatively outperformed the world, it was thought that we are likely to fall a lot. But that narrative has not played out entirely in India. How scary is this higher for longer in your view for risky assets overall? If you look at the way the global interest rates have been, since 1980, you have had basically a one-way bet on interest rates that they will be declining and that is what has happened.

The world’s supposedly preferred “safe-haven” is not being treated as such as the global economy shudders from the possibility of more inflationary and rate hike pain. Its nemesis instead wears the crown, sitting atop the current market upheaval.

The last interest rate hike by the Reserve Bank of India (RBI), in the current rate hike cycle, happened on 8 February. The next meeting is round the corner, on 6 October. It is likely that RBI would pause at the current level for some time. There is also a faint expectation that RBI may hike the rate one last time, taking the repo rate from 6.5% to 6.75%. Here are two factors that will influence the decision by RBI.

The US dollar index, after reaching a peak of 106.84 during its 11-week bullish streak, now faces the risk of ending this streak by potentially falling as low as 105.5.

They are two of the world’s biggest trades and both are overcrowded on the long side, with charts suggesting the need for meaningful corrections.

Despite sharp downside in the US stock market on Tuesday amid a fresh push higher in long-dated US yields to new multi-decade highs as traders pricing in a policy of higher interest rates for longer from the US Federal Reserve, Bitcoin (BTC) continues to hold up relatively well.

Ever wondered why so many people rally behind permabears, even when their track record suggests they're often wide of the mark?

One is backed by the “higher-for-longer” rates mantra and the other by what can now be termed “lower-for-longer” rates preference. The odds of the US dollar reaching parity with the euro are still there but charts suggest the greenback will probably hit stiff resistance soon after rising relentlessly since the end of July.

The US dollar index is on track to extend its winning streak for the 10th consecutive week, maintaining its robust outlook. This strength is bolstered by the persistent hawkish stance of the Fed after the decision to keep interest rates unchanged this month, as well as lackluster economic data emerging from Europe.

The US Federal Reserve announced its interest rate decision after a two-day FOMC meeting and left the benchmark interest rates unchanged at 5.25% — 5.50%. But Fed officials also signalled that they expect to raise rates once more this year. Bitcoin (BTC) fell 0.42% to $26,997, whereas Ethereum (ETH) was just above the 1,600 level. Meanwhile, the global cryptocurrency market cap was trading lower, around $1.07 trillion, falling 0.56% in the last 24 hours. «Bitcoin is staying afloat around $27,000 in spite of declines in stock indices after the US Fed's press conference. While the Fed held its interest rates, it signalled an upcoming increase before the end of the year. US Dollar index, DXY, continues to showcase strength which can negatively impact crypto asset prices in the near term,» said Vikram Subburaj, CEO of Giottus Crypto Platform.

India is the world’s 3rd largest oil importer and the rise above $95 could bring back inflation fears and put pressure on India's fiscal math. India’s current account deficit can widen, thus weakening its currency, says Navneet Damani, Head of Commodity & Currency Research at Motilal Oswal Financial Services.Considering the current trends in crude oil prices, where do you see Brent/WTI price targets in the near term and for the year 2023? Oil prices have been on a roll trading at 10 months highs recently, as Chinese central banks have been cutting cash reserve requirements to boost its economic recovery, expectations of peaking interest rate cycles by major central banks along with output cuts driven by Saudi Arabia and Russia amid record global consumption. Prices got a further boost after the IEA warned that continued supply cuts by the two OPEC+ leaders are likely to create a “significant supply shortfall” and threaten further price volatility.

The economic calendar is full of key data from the US this week, which should make for a volatile week for all the major pairs. But the fact we also have an interest rate decision from the ECB to look forward to means the EUR/USD will be among the more active pairs, making it the currency pair of the week to watch.

This week witnessed notable fluctuations in the global Forex market, particularly with the release of data from both the US and the Eurozone.

On the Comex, Gold futures were trading at $1,972.70 per troy ounce on Friday, down by $0.30 or 0.02% while Silver futures were trading at $24.985, lower by $0.119 or 0.470%. The DXY was trading flat at 103.63 against a basket of six top currencies, though the bias was positive. The October Gold futures had ended with declines of Rs 105 or 0.18% per 10 gram at Rs 59,373 while the December Silver futures closed higher at Rs 75,685, down by Rs 595 per kg or 0.78%. «Gold is likely to go up for a second week in a row because US inflation matched expectations, which makes the Federal Reserve less likely to raise interest rates. This led to a drop in Treasury yields, which is good for gold.