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US Dollar Dips as Yields Drop, Stocks Erase Gains

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Equities

Major US indices gave up partial gains as the optimism from the trade agreement between China and the United States faded. Investors are monitoring closely the US Treasury yields as a yield curve inversions provide early signs to detect a recession. The Dow Jones Industrial Average earned 0.9% to 25824, the S&P500 gained 0.1% to 2791, and the Nasdaq futures rose 0.2% to 7054.

USD

The dollar index which measures the greenback against a basket of major currencies fell 0.2% to settle at 96.95, weighed down by the possibility of a pause in Fed's rate hike. The Federal Reserve Chairman Jerome Powell announced last week that interest rates are "just below" the neutral level. His comments lowered the chances of a multiple interest rate hike in 2019 and drove the Treasury yields lower. The US 10-year yields fell to an eleven-week low of 2.94%, and the difference between the 2-year and 10-year yields declined to the lowest since 2007. Moreover, the curve between the 3-year and 5-year yields inverted for the first time since 2007. Such incidents hint that there could be a recession ahead which will force the Fed to rethink their rate hike plans. The USDJPY lost 0.5% to 113.06, and the EURUSD rose 0.3% to $1.1390.

Metals

Metals prices strengthened as the dollar tumbled along with Treasury yields. The gold ounce price climbed 0.6% to $1237, and the silver ounce price appreciated 1% to $14.51.

Oil

Oil prices advanced on expectations that OPEC and Russia will cut supply in the upcoming meeting on December 6. Moreover, the prices earned support from the optimism of a trade deal between China and the United States which could boost the global economy. The West Texas Intermediate crude futures added 4.8% to $53.06, and the Brent futures jumped 4.6% to $61.80. The American Petroleum Institute will report the weekly crude oil stock later today.

Major Economic Events

GMT Country Event Expectation Previous
15:00 US FOMC Member Williams Speaks    
21:30 US API Weekly Crude Oil Stock   3.453

 

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