The dollar index (DXY00) climbed to a 7-week high today and is up by +0.10%. The dollar found support today on hawkish comments from Boston Fed President Susan Collins, who said she saw inflation remaining above 2%, suggesting she may favor additional Fed tightening.

Dollar gains are limited today after WTI crude oil prices fell more than 1% to a 3-week low, easing inflation expectations and potentially persuading the Fed to loosen monetary policy, a bearish factor for the dollar. Also, today’s weaker-than-expected Sep Richmond Fed manufacturing survey is bearish for the dollar.

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The US Sep Richmond Fed manufacturing survey fell -6 to a 7-month low of -2, weaker than expectations of 2.

Hawkish comments today from Boston Fed President Susan Collins suggest she may favor additional Fed tightening when she said she saw an "increased likelihood" of scenarios in which inflation remains "notably above 2%."

Markets are pricing in a 51% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.

EUR/USD (^EURUSD) fell to a 7-week low today and is down by -0.16%. Strength in the dollar today is undercutting the euro. Lower European government bond yields are also weighing on the euro after the 10-year German Bund yield fell to a 1.5-week low of 3.422% today, weakening the euro’s interest rate differentials. Euro losses accelerated after the Eurozone Sep consumer confidence index fell more than expected.

Euro losses are limited on concerns that the ECB may have to keep tightening monetary policy after ECB Chief Economist Philip Lane said a new wave of high energy prices means Eurozone inflation will stay elevated longer than the ECB initially anticipated. Also, today’s -1% decline in crude oil prices to a 3-week low supports the Eurozone economy and the euro, as Europe imports most of its energy.

The Eurozone Sep consumer confidence index fell -1.0 to -16.5, weaker than expectations of -16.0.

The markets are discounting a 46% chance of a +25 bp ECB rate hike at the ECB’s next policy meeting on October 29.

USD/JPY (^USDJPY) is down by -0.08% today. The yen is strengthening today with the -1% fall in crude oil prices to a 3-week low, which is a positive factor for Japan’s economy and the yen, as Japan imports more than 90% of its energy. Also, lower T-note yields today are supportive of the yen. Moves in the yen may be exaggerated today amid below-normal trading activity, with markets in Japan closed for a National holiday.

Markets are pricing in an 18% chance of a +25 bp BOJ rate hike at the next policy meeting on October 30.

December COMEX gold (GCZ26) is down -19.00 (-0.43%) today, and December COMEX silver (SIZ26) is down -0.215 (-0.32%).

Precious metals are sliding today amid dollar strength as the dollar index climbed to a 7-week high. Also, hawkish central bank comments today undercut precious metals after Boston Fed President Susan Collins said she saw inflation remaining above 2% and after ECB Chief Economist Philip Lane said inflation in the Eurozone may stay elevated longer than the ECB initially anticipated, raising concerns the Fed and ECB may tighten monetary policy further.

Losses in precious metals are limited today after crude oil prices fell more than -1% to a 3-week low, easing inflation expectations and potentially prompting the world’s central banks to ease monetary policy, a bullish factor for precious metals. Lower global bond yields today also support precious metals.

Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 6.5-month high on Monday. Long holdings in silver ETFs rose to a 5.75-month high today.

Strong central bank demand for gold is supporting gold prices, after news last Monday that bullion held in China's PBOC reserves rose by +650,000 ounces to 76.73 million troy ounces in August, the largest increase in three years and the twenty-second consecutive month the PBOC boosted its gold reserves.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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