US Dollar Rises On New Fed Rate Concern

Reacting to stronger underlying inflation news in the U.S. economy, the dollar moved up today. The nominal notion is that the inflation data feeds the fire of the speculation about an interest rate hike by the Federal Reserve. We still find that scenario unlikely.

"The inflation picture looks less grim. That gave some stability to the dollar," said Sebastien Galy, currency strategist at Deutsche Bank in New York.

Despite a strong cross-body block from the higher greenback, gold managed to rise for most of the day. However, in late afternoon trading, it is well off its recent 3-1/2 month highs, standing at 1182 
as we near 4 PM in New York trading.

Silver shadowed gold’s trading pattern today, off slightly. Platinum is leading the metals charge – up around 0.60% – with palladium higher by about 0.40%.

Ignoring a drawdown of U.S. gasoline supplies, West Texas Intermediate and Brent North Sea fell, with the latter drop almost a full percent. (Supply drawdowns of any petroleum product should push prices higher.) The impetus for that was a dramatic rise in crude inventories. (The more robust dollar did not help oil, either.)

It should be noted that the gasoline supply/price will be operating independently of the overall energy complex. At this time of year gasoline refiners shut down their plants for maintenance while switching from summer to winter blends.

The Energy Information Administration (EIA) reported crude inventories rose by 7.6 million barrels for the week that just ended on Oct 9.

All major indexes across the globe were up. Shanghai and Hong Kong jumped more than 2% on hopes that the Fed will restrain itself from raising interest rates “soon.”

U.S. equities were up more modestly than Asia’s although the gains in New York were impressive. The Dow, S&P and NASDAQ rose 1.25%, 1.40% and 1.65% respectively.

The U.S. 10-year bond yield edged back over 2.00% on the above-mentioned inflation news and the fear of an interest rate hike.

Regardless of what you think of the somewhat conflicting market movements today, turn to Washington and bow to the Fed.

Wishing you as always. good trading,