The US dollar has shown signs of stabilization following yesterday’s notable surge. In light of the cautionary remarks from Japan’s finance minister, the yen stands as the strongest among the G10 currencies today, reflecting an approximate gain of 0.15%. The most sluggish underlying inflation in Norway over the past four months has impacted the krone, which has declined approximately 0.35%. Aside from the krone, the G10 currencies remain relatively stable. Emerging market currencies exhibit a broad spectrum, yet they remain varied in performance. Following the conclusion of this extended national holiday, China has revealed a series of initiatives, which encompass expanded export restrictions on rare earths related to EV battery technology, as well as a tax imposed on US vessels docking in Chinese ports.

Japanese and Chinese equities experienced a decline, with the major indices dropping over 1%. While South Korea and Indian markets experienced a rally, the majority of other significant exchanges in the region saw declines. Europe’s Stoxx 600 remains relatively stable, while US index futures show a slight uptick. Benchmark 10-year yields are exhibiting a softer trend in Japan and Europe, generally declining by 1-2 basis points. UK Gilts and French bonds are leading the performance metrics today. French President Macron is anticipated to announce a new prime minister today, while Belgium’s credit rating may face a downgrade today.

The 10-year Treasury yield has decreased by almost three basis points, now standing at 4.11%. The weekly low is approximately 4.09%. Gold maintained yesterday’s low just under $3945 and has risen above $4000 today. The peak established on Wednesday reached nearly $4060. November WTI faced resistance after nearing $63 on Wednesday and Thursday, and has now tested the $61 range today. The week’s low stands at approximately $60.70. The Dollar Index surged to nearly 99.60 yesterday, marking its highest point since August 1, when it peaked at 100.25. The charts show minimal resistance to a return that high, which holds significance from a technical standpoint. The neckline of a double bottom may be in play, and if surpassed, it could indicate a year-end rally targeting the late March high around 104.70. That is not our primary scenario.

The DXY is currently experiencing consolidation within a tight range, fluctuating between 99.20 and slightly above 99.40 today. The federal government is currently closed, and the market is reflecting a strong expectation of a rate cut later this month, with approximately an 80% probability of an additional cut during the final meeting of the year in December. The preliminary October University of Michigan data stands out as the key indicator today, given the absence of government statistics. Minor slippage is anticipated in sentiment and expectations. The one- and 5-10-year inflation is projected to remain stable at 4.7% and 3.7%, respectively. In the event that the government remains closed next week, the key focus will be on the Fed’s Beige Book along with the surveys.