Update on the US Dollar, Interest Rate Hike, and US Treasury Yields
- After pulling back on November 25, the US Dollar Index(DXY) fell in the early hours on November 28.
- The stronger economic data improved the chances of an interest rate hike in December. It pushed the dollar to a new 13-year high last week.
- According to the data released by the U.S. Census Bureau last week, the Durable Goods Orders for October rose 4.8%. It’s better than the previous month’s value of 0.4% and higher than the market’s expectations of a 1.5% increase. The stronger US manufacturing PMI data also supported the US dollar. October’s manufacturing PMI was 53.9. It’s higher than analysts’ expectations of 53.4.
- The Fed’s November minutes also increased the market’s expectations of an interest rate hike and strengthened the dollar. The PowerShares DB US Dollar Bullish (UUP) was weaker in early hours.
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Fed’s November minutes
- The Fed’s November minutes showed that most of the members said it “could well become appropriate” to raise the interest rates “relatively soon.” It increased the expectations of an interest rate hike in December.
US Treasury yields
- US Treasury yields retreated from last week’s highs in the early hours on November 28. Last week, the expectations of an increase in spending, growth, and inflation under Donald Trump’s presidency pushed US Treasury yields higher.
- There was weaker sentiment in the oil market amid speculations about countries agreeing to the output cut deal in producers’ meeting on November 30.
- At 7:00 AM EST, the two-year Treasury yield was trading at 1.12—a fall of ~1.1%.
- At the same time, the ten-year Treasury yield was trading at 2.33—a fall of ~1.8%.
- The iShares 20+ Year Treasury Bond (TLT) was flat, while the ProShares UltraPro Short 20+ Year Treasury (TTT) and the ProShares UltraShort 20+ Year Treasury (TBT) were weaker.
- European Central Bank President Mario Draghi spoke at 9 AM EST.
- At 3:30 PM EST, the CFTC Commodities Speculative Net Positions will be released.
In the next part, we’ll discuss how crude oil, copper, gold, silver, platinum, and palladium performed in the early hours on November 28.