The US dollar is continuing the decline observed prior to the weekend. It is exhibiting a weaker performance against all the G10 currencies and the majority of emerging market currencies today. However, the intraday momentum indicators are stretched, and it is likely that some US participants will prefer to wait for the outcome of President Trump’s meeting with Democratic leaders in Congress before further extending the greenback’s sell-off, especially considering the potential government shutdown starting Wednesday.
Equities are primarily on the rise. In the Asia Pacific region, Japanese equities stood out as the primary exception, with the Nikkei experiencing a decline of 0.7%, while the markets in Taiwan remained closed. The Hang Seng spearheaded today’s rally, achieving an impressive gain of nearly 1.9%, while mainland shares listed there increased by 1.6%. Europe’s Stoxx 600, which recorded a slight increase last week, has risen nearly 0.40% today. US index futures have reduced their weekly losses ahead of the weekend, currently showing an increase of 0.4% to 0.65%. Bonds have also experienced a rally. In Europe, benchmark 10-year yields have decreased by 2-3 basis points. The US 10-year yield, which neared 4.20% in the latter part of last week, has decreased by 3-4 basis points today, currently sitting around 4.14%. The US Treasury has no coupon sales scheduled for this week; however, there are numerous bills available.
The weakened dollar, declining interest rates, and the potential for a US government shutdown contributed to gold reaching a new high close to $3820. However, it has encountered a standstill and may approach the $3800 level in North America. The possibility that OPEC+ may opt to increase output at the week’s conclusion has led to a decline in November WTI, which has retreated to approximately $64.60 today after peaking at $66.40 prior to the weekend, marking the highest level since August 1. Following a rally on Wednesday and Thursday, the Dollar Index has entered a phase of consolidation as the weekend approaches. The highest point was reached last Thursday at approximately 98.60. The asset has retraced further today, approaching nearly 97.85. Proximity to support is identified in the 97.70-80 range. Simultaneously, it is becoming progressively challenging to envision a scenario in which a federal government shutdown at midnight tomorrow can be avoided.
The likelihood of the meeting between the president and congressional leaders today, which was previously canceled last week, successfully addressing the primary hurdle appears minimal; specifically, both parties perceive benefits in a shutdown. This overshadows other immediate issues. Today’s diary presents a light agenda; we have pending home sales and the Dallas Fed’s manufacturing survey. Looking ahead to tomorrow, we can expect house prices, the August report, and the September Conference Board’s survey. The September employment report scheduled for Friday would be postponed due to a government shutdown. The ADP private sector jobs estimate could gain increased influence as a result. The median forecast in Bloomberg’s survey indicates an anticipated increase of 48k in the ADP estimate.