Dollar Sees Support From Positive U.S. Consumer News

The dollar index (DXY00) on Friday rose by +0.15%.  The dollar found support from stronger-than-expected U.S. personal spending and consumer sentiment reports.  The dollar also found support from a +9 bp rise in the 10-year T-note yield to 4.01%.

Sep U.S. personal income showed the expected rise of +0.4% m/m, while the Sep personal spending report of +0.6% m/m was a bit stronger than expectations of +0.4%.  The Q3 employment cost index rose +1.2%, in line with market expectations.

Friday’s Sep PCE deflator report of +0.3% m/m and +6.2% y/y was close to market expectations.  The Sep core PCE deflator report of +0.5% m/m and +5.1% y/y was also close to market expectations.  The PCE deflator is the Fed’s preferred inflation measure. The Sep headline PCE deflator report of +6.2% y/y was unchanged from August and remained 0.8 points below June’s 40-year high of +7.0%.  The Sep core deflator of +5.1% y/y was up from Aug’s +4.9% but remained 0.3 points below the 39-year high of +5.4% posted earlier this year in February and March. 

Friday’s Sep U.S. pending home sales report of -10.2% m/m and -30.4% y/y was much weaker than expectations of -4.0% m/m and provided another indication that the U.S. real estate market is in the early stages of caving in due to the sharp rise in mortgage rates.

The final-Oct U.S. consumer sentiment index rose by +0.1 point from the preliminary-Oct level, which was stronger than expectations for a -0.2 point downward revision.  The consumer sentiment index has rebounded sharply by a total of +9.9 points in the past four months to October’s 6-month high of 59.9 from June’s record low of 50.0.

EUR/USD (^EURUSD) fell slightly by -0.09%.  The euro saw underlying support from Friday’s sharp +14 bp rise in the 10-year bund yield to 2.10% and the stronger-than-expected German GDP and Eurozone CPI reports. 

Germany’s Q3 GDP report of +0.3% q/q was stronger than expectations for a -0.2% decline.  Also, the Oct Eurozone CPI rose to +12.8% y/y from Sep’s +9.4% and was much stronger than expectations of +9.9%, which was hawkish for ECB policy.

USD/JPY (^USDJPY) rose by +0.79%.  The yen was undercut as the BOJ maintained its extraordinarily easy monetary policy, bucking the global trend for interest rate hikes to knock out inflation.  The BOJ lefts its interest rate and QE policies unchanged at the 2-day policy meeting that ended on Friday.

December gold (GCZ2) Friday closed -20.80 (-1.25%), and December silver (SIZ22) is down -0.347 (-1.78%).  Precious metals prices were undercut by the stronger dollar and the rise in U.S. and German bund yields.  Gold has been undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/2 year low Thursday.

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