The possible end of the longest US government shutdown in history in the near future has boosted risk appetites, leading to a widespread rise in equities while the dollar remains largely stable. The dollar exhibits mixed results when compared to the G10 currencies. The Japanese yen appears to have been negatively impacted by the rise in US rates. The currencies of the dollar-bloc and the Scandis are leading the movement away from the dollar. In the realm of emerging market currencies, the Indian rupee, Turkish lira, Thai baht, and several central European currencies are facing minor downturns. The South African rand, Malaysian ringgit, and South Korean won are propelling the intricate rise.
Today, several major stock exchanges in the Asia Pacific region saw gains surpassing 1%, particularly the Nikkei, Hang Seng, and South Korea’s Kospi. The Kospi saw a 3% rise, fueled by the potential for a dividend tax reduction in South Korea and the expected increase in domestic equity investments by a pension fund. Europe’s Stoxx 600 has risen by 1.4% in the morning trading session. The anticipated growth is expected to be the most significant in half a year. The S&P 500 futures are up nearly 1%, and the Nasdaq futures have climbed by about 1.5%. In the Asia Pacific region, the benchmark 10-year rates saw an increase of 2-4 basis points. On the other hand, Europe presents a more diverse landscape, as peripheral premiums are shrinking compared to Germany. The 10-year US Treasury yield is presently at just below 4.13%. Last week’s high was about 4.16%, whereas the high from the month before was roughly 4.20%. Gold has risen by 2% today after experiencing a drop over the past three weeks. The asset has exceeded the 20-day moving average (~$4080) for the first time in more than two weeks. The next target might be approximately $4135. December WTI is seeing quiet trading, staying within the range set last Friday, which was also limited by last Thursday’s range of about ~$58.85-$60.50.
The Dollar Index is currently finding stability within the range set last Friday, roughly between 99.40 and 99.85. The declines seen since the middle of last week led to the Dollar Index giving up just over fifty percent of the gains achieved after last month’s hawkish cut by the Federal Reserve. The pullback happened just below 99.50. The forthcoming pullback and the 20-day moving average are situated within the 99.20-25 range. Once a peak is reached, we can expect a retreat following the notable rise that began with the rate cut on September 17. The main retracement target (38.2%) is located slightly above 98.75. Even with the current government shutdown in the US, there are signs that negotiations are underway for a deal to reopen, which could be concluded soon. The Dollar Index hit its highest point today in the early trading session across the Asia Pacific, aligning with the news release. The minimum was observed during the early European trading session. There are no notable entries on the economic calendar today. Tomorrow’s holiday will lead to the bond market being closed, whereas the stock market will continue to operate. Meanwhile, some pressure in the money market has eased; however, with reserves remaining low and the situation worsened by the Treasury’s General Account being at elevated levels due to seasonal factors, the ongoing government shutdown results in funds being deposited but not utilized due to the lack of spending authorization. That tightens financial conditions. A notable difference between the present circumstances and those of 2019 is the creation of a standing repo facility by the Federal Reserve. The current application may be helping the financial system handle the challenges it encounters.
After the rebound that started in the middle of last week, the euro has nearly recovered (61.8%) of the losses experienced since the Fed’s aggressive decision at the end of last month. The asset saw a halt around $1.1595 at the end of last week, aligning with the placement of the 20-day moving average. The market is showing limited movement today, oscillating between roughly $1.1540 and $1.1585. The next immediate target is roughly $1.1620, while the high from the day before the Fed’s cut was about $1.1670. Options for 1.14 billion euros at $1.1600 are scheduled to expire today. The movement in prices is more important than the economic data that came out this week. Tomorrow, Germany’s November ZEW survey is set to be released. The recent assessment has decreased in value over the past three months. The figure stood at -80 in October, down from -93.1 the year before. Anticipations offer a different story. They have shown consistent growth over the last two months and in five of the last six periods. The figure was 39.3 in October and fell to 15.7 by the end of the previous year.