From Marc Chandler at Bannockburn Global Forex:
Overview: The dollar's sell-off last week was extreme and it recovered yesterday and through the European session today. The Australian dollar has been hit the hardest. It is off more than 1% today after the RBA lifted the cash rate by 25 bp (to 4.35%). Still, the US dollar's gains have stretched intraday momentum indicators, suggesting the upside correction may be nearly over. The greenback's moves appear to have been driven by interest rate expectations. Recall that at the end of last week, the market was pricing in three Fed cuts next year and a strong chance of a fourth hike. Yesterday, the implied yield of the December 2024 Fed funds futures rose by 13 bp, which essentially unwound the chances of a fourth cut next year. The implied yield is four basis points lower today to 4.51%. The current average of Fed funds is 5.33%, implying about 82 bp of easing is discounted.
Equities are heavy today. Most of the Asia Pacific bourses fell, with Taiwan the notable exception. The MSCI Asia Pacific Index snapped a four-day advance. Europe's Stoxx 600 is off marginally. It settled slightly lower yesterday too, which ended the five-day rally. US index futures are also trading with a heavier bias. Bond markets have rallied. Benchmark 10-year yields in Europe are off 6-9 bp. The 10-year US Treasury yield is off five basis points to slip below 4.60%. Lower yields and a firmer dollar are weighing on gold. After it briefly poked above $2000 ahead of the weekend, gold fell by $14.50 yesterday and is off almost $12 today to near $1966. December WTI is pushing below $80 a barrel for the first time since late August. Demand concerns appear to be offsetting geopolitical concerns and the tightness of supply.....
....MUCH MORE
