In the markets, gold experienced a decline of $10, bringing its value down to $1995. Additionally, US 10-year yields saw an increase of 4.3 to 4.89%. On a positive note, the S&P 500 rose by 48 points, reaching 4185, or 1.2%. However, WTI crude oil faced a decrease of $3.10, dropping to $82.44. The Australian dollar performed well, while the US dollar lagged behind.
The weakening of the US dollar can be attributed to several factors. Firstly, the diminishing geopolitical risk premium had a negative impact on both the USD and the CHF. Furthermore, there was selling of USD/JPY ahead of the BOJ. Another influential factor was the statement made by Timiraos regarding the Federal Reserve potentially stepping back and implementing cuts in the following year. Despite these reasons, the decline in USD/JPY was unexpected, as it quickly dropped to 148.81 from 149.75 due to a report from Nikkei about the BOJ considering a lift to YCC. However, EUR/USD remained strong despite a soft German inflation report, indicating that market focus is currently on geopolitical factors. Cable also followed suit, reaching a four-day high.
Despite a challenging day for oil, the commodity currencies, including the Canadian dollar, showcased strength. The market experienced fluctuations as stocks fluctuated, but ultimately maintained a positive outlook. Towards the end of the day, the dollar faced pressure due to refinancing data, suggesting that the US may issue less debt than anticipated. The impact of this will become clearer when Wednesday’s coupon sizes are released and analyzed, revealing if it leans towards the longer end. Overall, the market atmosphere remained relatively optimistic.