Fed Rate Cut Bets Push Dollar Down, Gold Up

The dollar index slipped 0.35% today after a batch of softer US economic data sparked fresh speculation about December rate cuts. September retail sales came in at just +0.2% month-over-month (below the +0.4% forecast), while core producer prices rose only +2.6% year-over-year, missing the +2.7% expectation. Treasury yields fell to 3.5-week lows, with the 10-year note hitting 4.002%, further pressuring the greenback.

Markets are now pricing in an 80% probability of a 25 basis point Fed cut at the December 9-10 FOMC meeting—a significant shift higher. Consumer confidence also retreated more than expected to a 7-month low of 88.7, adding to the narrative.

Currency moves:

• EUR/USD rallied +0.50%, boosted by a weaker dollar and optimistic signals on Ukraine peace talks. Eurozone car registrations posted their fourth consecutive monthly gain.
• USD/JPY dropped -0.57% as yen strength resumed on intervention concerns from Japan’s government.

Precious metals pop: December gold futures jumped +0.77% to post 1-week highs, with silver up +0.90%. The rally reflects both Fed rate cut expectations and safe-haven demand. China’s central bank added another 74.09 million ounces to reserves in October (their 12th straight monthly increase), while global central banks snapped up 220 metric tons of gold in Q3—up 28% from Q2.

On the flip side, easing inflation expectations (10-year breakeven inflation fell to 2.112%) and de-risking on Ukraine peace talks are capping upside.