WHAT’S GOING ON? WHY ARE U.S. DOLLAR INDEX & TREASURY YIELDS PULLING BACK

US Dollar Index

The US Dollar Index regained strength last week and started this week on a stable note. The dollar rose after the FOMC’s statement was released on Wednesday. However, the dollar pulled back on Thursday amid profit-booking and started Friday on a weaker note.

Why the US Dollar Index and Treasury Yields Pulled Back

Market sentiment

The market sentiment on the US dollar was strong at the beginning of this week amid high expectations of a hawkish tone by the Fed in Wednesday’s FOMC statement. The US dollar rose to two-week high levels as the Fed signaled one more interest rate hike by end of this year. The Fed also announced its plan to reduce its $4.5 trillion balance sheet. Profit-booking at elevated levels made the dollar pull back on Thursday. In the early hours on Friday, the sentiment is weak amid reports about a warning from North Korea. The country mentioned a possible hydrogen bomb test in the Pacific Ocean. On the other hand, the market is looking forward to the release of the US manufacturing, services, and composite purchasing managers’ index reading today.

At 6:20 AM EST on September 22, the US Dollar Index was trading at 91.89—a fall of 0.4%.

US Treasury yields

After starting this week on a stronger note, US Treasury yields moved higher in the first three trading days of this week and lost momentum on Thursday. With dented sentiment, Treasury yields started Friday on a weaker note and traded with weakness in the early hours. The decreased risk appetite amid fresh North Korea tensions weighed on Treasury yields in the early hours.

Movement in Treasury yields 

 The movement in Treasury yields at 6:25 AM EST on September 22 was:

  • The ten-year Treasury yield was trading at 2.250—a fall of ~1.2%.
  • The 30-year Treasury yield was trading at 2.780—a fall of ~0.99%.
  • The five-year Treasury yield was trading at 1.860—a fall of ~1.4%.
  • The two-year Treasury yield was trading at 1.431—a fall of ~0.83%.

The iShares 20+ Year Treasury Bond ETF (TLT) fell 0.06%. The ProShares UltraPro Short 20+ Year Treasury ETF (TTT) and the ProShares UltraShort 20+ Year Treasury ETF (TBT) rose 0.16% and 0.11%, respectively, on September 21.

In the next part, we’ll discuss how commodities performed in the early hours on September 22.

Pre-Market Report: Mixed Global Markets, Lower Risk Appetite 

Commodities Are Strong in the Early Hours on September 22

Crude oil

Crude oil rose last week amid the improved market sentiment but started this week on a mixed note. After trading with subdued momentum for the first two trading days, the market regained strength as the week progressed amid expectations of supply cut extensions. In the early hours on Friday, crude oil is trading with strength above opening prices.

Commodities Are Strong in the Early Hours on September 22

Market sentiment

The market sentiment was strong amid decreased geopolitical concerns at the beginning of this week. Crude oil’s improved demand outlook after the International Energy Agency’s monthly report supported oil prices. Crude oil regained strength as the week progressed amid increased expectations of supply cut extensions by OPEC. Major oil producers like OPEC and Russia are gathering in Vienna today to discuss extending the supply cut agreement. The market is waiting for the US oil rig count data by Baker Hughes at 1:00 PM EST today.

At 6:40 AM EST on September 22, the West Texas Intermediate crude oil futures contracts for November 2017 delivery were trading at $50.62 per barrel—a gain of ~0.14%. The Brent crude oil futures contracts for November 2017 delivery rose 0.16% and traded at $56.52 per barrel. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) closed at $32.91 after rising 0.15% on September 21.

Metals

Copper fell for two consecutive trading weeks amid profit-booking and China’s weak data. However, copper started this week on a stable note due to the release of China’s strong new loans data. After consolidating for three days, copper lost its strength on Thursday amid the strong dollar. In the early hours on Friday, copper is trading with weakness due to China’s downgrade by Standard and Poor’s.

Gold (GLD) and silver (SLW) are strong in the early hours on September 22. The market’s decreased risk appetite amid fresh North Korea concerns and the dollar’s pullback are supporting gold prices in the early hours. The weak dollar supports the prices of dollar-denominated commodities like copper, gold, and silver. Platinum is strong, while palladium is weak in the early hours on September 22.

– http://marketrealist.com

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