The dollar is experiencing significant strength today. The currency exhibits a decline in strength relative to almost all global currencies. The persistent high trade tensions between the US and China remain the primary focus of discussion today. US rates were soft before Fed Chair Powell spoke yesterday and continue to remain soft, coinciding with market participants appearing to demand a higher premium for holding dollars due to policy uncertainty. This is compounded by the ongoing federal government shutdown, with both sides showing minimal movement. In a surprising turn of events, China has refrained from weaponizing the exchange rate, opting instead to establish the dollar’s reference rate at its lowest point since last November.

In the meantime, gold has experienced an upward trend, achieving a new peak just above $4218 today. It concluded the previous week approximately $100 lower. Bonds and equities are experiencing a rally today as well. Benchmark 10-year yields in Europe are generally 2-3 basis points lower, while the UK’s 10-year Gilt yield has decreased by more than four basis points, now standing below 4.55%. The French political impasse seems to be resolving, with its premium over German narrowing to approximately 78 basis points, the lowest level since early September. The 10-year Treasury yield is currently positioned just above 4%. Today, the majority of significant equity markets in the Asia Pacific region experienced a rally exceeding 1%, with South Korea’s Kospi at the forefront, achieving an impressive increase of nearly 2.7%.

Europe’s Stoxx 600 has increased by nearly 0.7%, while US S&P futures have risen by over 0.5%, and Nasdaq futures have climbed close to 0.8%. WTI is currently experiencing a period of consolidation within a tight range, hovering around yesterday’s settlement price of approximately $58.25, based on December contracts. The Dollar Index continues to trade within the established range from last Thursday, approximately 98.70-99.55. Following yesterday’s approach to the upper end (nearly 99.50), it experienced a decline today, hitting a four-day low at the lower end of the range, around 98.75.

There is a prevalent view that Fed Chair Powell exhibited a dovish stance in his remarks yesterday. Perhaps, but the likelihood of a cut later this month has decreased marginally in the Fed funds futures market yesterday (to 97.6% from 99.2%). A trivial adjustment, indicating that Powell did not provide the market with any new information. The US two-year yield recorded its lowest settlement of the year yesterday, slightly above 3.48%, and continues to exhibit weakness today. The 10-year yield is currently situated close to 4.0%. At this juncture, the US federal government continues to be in a state of closure, with no resolution currently visible on the horizon. The Fed’s Beige Book could hold increased importance due to the lack of official data available. Furthermore, it is frequently cited by Fed Chair Powell. Trade tensions between the US and China remain elevated, as President Trump has issued a threat to refrain from purchasing China’s used cooking oil in response to Beijing’s lack of purchases of US soy.