U.S. Dollar and Treasury Yields Rise Following Fed Minutes


The dollar index which measures the strength of the greenback against a basket of major currencies surged to a one-week high of 95.75 during the Asian session. In the minutes of the 26 September FOMC meeting, the Fed signaled further gradual rate hikes and confirmed the strong performance of the economy. The U.S. Treasury yields gained on the Fed's hawkish tone where the 10-year yields rose to a one-week high of 3.214%.


Major U.S. indices finished slightly lower on hawkish Fed minutes. The stock market suffered a sell-off last week as bond yields rose to a multi-year high. The Dow Jones Industrial Average lost 0.4% to 25706, S&P500 fell 0.1% to 2809, and the Nasdaq Composite Index was almost flat at 7642.


The Euro fell to a one-week low against the United States dollar on Italian budget woes. The Italian government presented a draft budget for 2019 with a deficit target of 2.4% of GDP which could breach the European Union's fiscal rules. The inflation figures for September were reported yesterday and showed that the Consumer Price Index was unchanged at 2.1%. The EURUSD tumbled to a low of $1.1482 ahead of the European trading session.


The pound was weaker against major currencies on soft inflation data and Brexit deal tension. The September Consumer Price Index fell to 2.4% from 2.7% prior. The EU's chief Brexit negotiator Michel Barnier said that a deal would require more time. On the other hand, Theresa May restated that differences remain on the Irish border issue. The GBPUSD is trading at a one-week low of $1.3076. Market participants will be waiting for the Retail Sales figures of September along with any news from Brussels.


Gold prices fell to a three-day low of $1219 on a stronger dollar and higher U.S. yields. The bullion rose to a ten-week high during the last week, supported by higher risks and market uncertainty. However, hawkish Fed remains a nightmare for the precious metal. Also, the silver ounce depreciated to $14.45.


Oil prices drifted lower due to a jump in U.S. crude inventories. The Energy Information Administration reported that the U.S. weekly crude oil inventories rose by 6.490 million barrels last week. The West Texas Intermediate crude futures traded at a low of $69.47 per barrel, and the Brent futures dipped to a low of $79.24 per barrel.

Major Economic Events

GMT Country Event Expectation Previous
8:30 UK Retail Sales (MoM) (Sep) -0.4% 0.3%
8:30 UK Core Retail Sales (MoM) (Sep) -0.4% 0.3%
  EU EU Leaders Summit 2.1% 2.1%
12:30 US Philadelphia Fed Manufacturing Index (Oct) 19.7 22.9
12:30 US Initial Jobless Claims 211 214


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