Forexlive Americas FX news wrap 9 Oct: Dollar, yields and stocks move higher ahead of CPI

• Record close on the S&P and the Dow.
• Eyes on the Middle East and weather in the hours ahead
• Crude oil futures settled at $73.24
• In the age of AI, here’s an old reminder that technology can advance at lightning speed
• What did a few, some, several, many, a substantial majority of Fed officials agree on
• FOMC Minutes: A substantial majority of participants supported a 50 basis point cut
• US sells 10-year notes at 4.066% vs 4.062% WI
• Fed’s Jefferson: Fed decisions will be meeting by meeting
• An Israeli warship was spotted off the city of Tyre in southern Lebanon
• Atlanta Fed GDPNow growth estimate for Q3 unchanged at 3.2%
• European equity close: Strong bounce with the DAX leading the way
• Milton downgraded to Cat-4 hurricane, still expected to land as major hurricane
• BofA: 4 reasons why we expect the ECB will cut rates much further than the consensus
• EIA weekly oil inventories +5810K vs +2048K expected
• Biden and Netanyahu will speak by phone at 10:30 am ET (am, not pm)
• US August wholesale sales -0.1% vs +0.5% expected
• China teases further stimulus but we will have to wait for the weekend
• US major indices are mixed in early US trading
• Fed’s Logan: A ‘more gradual’ path on rate cuts likely appropriate from here
• The kickstart video for Oct 9 looks at the technicals that drive the three major FX pairs
• ECB’s Makhlouf: Servies inflation and wage growth present some uncertainty
• Fed minutes and Fedspeak highlight the economic calendar
• Germany’s economy ministry now sees contracting economy in 2024
• The USD is the strongest and the NZD is the weakest as the NA session begins
• Forexlive European FX news wrap: Tight ranges as we await the US CPI
• US mortgage applications -5.1% vs -1.3% prior
• Morgan Stanley expecting slight deceleration in tomorrow’s CPI
• ECB’s Patsalides says room for rate cut but Middle East implications need assessment
• Interest rate expectations for upcoming policy decisions

The RBNZ cut rates by 50 basis points and that sent the NZD lower vs all the major currencies. The largest decline was vs the USD with a decline of -1.32% The USD was the strongest of the major currencies today:

Tomorrow the US CPI data will be released with the expectation of 0.1% gains for the headline and 0.2% for the core. That data will be released at 8:30 AM tomorrow along with the weekly initial jobless claims.

Technically, the pair moved down to test the 61.8% target of the move up from the early August low at 0.60509.

The USDJPY continued its move higher ahead of the CPI data tomorrow and tests the high from August 16 at 149.356. That will also be a key barometer for buyers and sellers in the new trading day. Moving above will be more bullish with the 50% and the 100/200 day MAs as upside targets in the new trading day. . Staying below will keep the sellers in play with the 38.2% at 148.11 a target.

The USDCHF moved higher and is testing the high from last Friday after stalling near the high of the Red Box on the correction lower yesterday. A move above the high from last week at 0.8607 would next target the 38.2% of the move down from the July high at 0.86312. Getting and staying above that level is needed to show the buyers are serious about moving this pair higher after trending lower.

Fundamentally, the Fed meeting minutes from the September meeting where the Fed cut rates by 50 basis points said:

The Fed minutes revealed that a “substantial majority” supported a 50 basis point rate cut, with “almost all” participants agreeing that inflation risks have diminished, while downside risks to employment have increased. Although some members preferred a smaller 25 basis point cut due to ongoing inflation concerns and solid economic growth, the committee gained confidence that inflation is moving towards the 2% target. Employment and inflation risks are now seen as roughly balanced, with the economy expanding at a solid pace and unemployment remaining low. The committee indicated it would carefully assess future data before making additional rate adjustments, anticipating a gradual move toward a neutral policy stance.

Earlier today Dallas Fed President Lorie Logan said:

Dallas Fed President Logan indicated that a “more gradual” approach to rate cuts is likely appropriate moving forward, given the upside risks to inflation. She expressed concern that inflation could remain above the Fed’s target and emphasized the importance of not rushing to reduce rates. A gradual reduction in rates would provide the Fed more time to assess how restrictive current policy is and help balance labor market risks without overly cooling it. Logan acknowledged that progress on inflation has been broad-based and that the labor market has cooled but remains healthy. However, she warned that stronger-than-expected economic growth and spending could increase inflationary pressures. Despite her hawkish stance, Logan is not advocating for a pause in rate cuts.

In the US stock market today, the major indices closed higher with both the Dow and the S&P closing at record levels:

• Dow industrial average rose 431.63 points or 1.03% at 42512.00
• S&P index rose 40.91 points or 0.71% at 5792.04
• NASDAQ index rose 108.70 points or 0.60% at 18291.62

The small-cap Russell 2000 rose 5.601 points or 0.26% at 2200.58

IN the US debt market, yields are closing near the highs with the 2 year yield back above 4.000%:

• 2-year yield 4.023%, +4.5 bps
• 5-year yield 3.918%, +5.3 bps
• 10 year yield 4.075%, +4.0 bps
• 30 year yield 4.343%, +1.9 bps

The US treasury auctioned off 10 year note with mixed results. The domestic demand was low but the international demand was very strong. There was a positive tail which brought the grade for the auction down toward a C+

Oil inventories surged but the build was lower than the private data. The gains may be due to the Hurricane perhaps? Just guessing but they were not close to expectations.

• Crude oil inventories +5810vs +2048K exp
• Gasoline inventories –6304K vs -1123K exp
• Distillates inventories -3124K vs -1865K exp
• Refinery utilization -0.9% versus expectations of -0.1% exp

Private oil inventory data from late yesterday:

• Crude +10900K (huge build)
• Gasoline -557K
• Distillates -2590K

The price of crude oil is trading down -$0.25 on the day at $73.32.

This article was written by Greg Michalowski at www.forexlive.com.