U.S. Dollar and Treasury Yields Advance on Powell's Comments

U.S. Dollar and Treasury Yields Advance on Powell's Comments


The Dollar index which measures the greenback against a basket of major currencies extended its daily winning streak to six, supported by strong U.S. economic data and hawkish Fed. The ADP Nonfarm employment change showed that the United States economy created 230 thousand jobs in September versus an expectation of 187, and the old reading was revised higher to 168 from 163. Moreover, the ISM Non-Manufacturing Index which tracks the business activity and conditions in the services sector rose to 61.6, the highest reading in more than twenty years. The economic indicators continue to prove that the U.S. economy is robust. On the other hand, the Federal Reserve Chairman Jerome Powell spoke at the Atlantic Festival in Washington DC and affirmed that the economy is performing well. Powell said that the unemployment rate is at a twenty-year low and inflation is at the 2% target. Moreover, he declared that interest rates are a long way from neutral and may go past neutral. These comments were enough to drive the U.S. 10-year Treasury yields to 3.22, the highest since April 2011, and the DXY to a six-week high of 96.12. The USDJPY advanced to 114.55, the highest since November, and the EURUSD tumbled to a six-week low of $1.1463.


Gold prices retreated from a two-week high as the dollar strengthened. The gold ounce fell from a high of $1208 and settled lower at $1198. On the other hand, the silver ounce finished the day in red at $14.63.


Oil prices climbed to a fresh four-year high despite the buildup in U.S. crude inventories. The Energy Information Administration reported that the U.S. crude oil inventories rose by 7.975 million barrels last week to a total of 403.96 million barrels. The West Texas Intermediate crude futures traded at a high of $76.88 per barrel, and the Brent futures tested a high of $86.71 per barrel. Oil prices remain supported by the looming sanctions by the United States on Iran's oil exports.

Major Economic Events

GMT Country Event Expectation Previous
12:30 US Initial Jobless Claims 211 214
14:00 CA Ivey PMI (Sep) 62.3 61.9


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