Dollar blows, rates drop, gold gains strength

Dollar blows, rates drop, gold gains strength


The dollar, sovereign interest rates and oil declined, while safe-havens were in demand, starting with government bonds, gold and the yen. Fed Chairman Jerome Powell reiterated his optimistic view of US growth as “sustainable” after 11 years of uninterrupted expansion.

In the foreign exchange market, the dollar index, which measures its evolution against 6 reference currencies, started lower Thursday, yielding 0.19% at 98.18 points, while the euro rose 0.12% to $1.1019. The yen gained 0.34% and the Swiss franc gained 0.14% against the greenback.

While the US economy is in its 11th consecutive year of growth (the longest expansion in its history), ” We’re growing at 2%, right in that range, more than any of the other advanced economies are growing. There’s no reason that can’t continue,” said the head of the Fed. According to him, the financial markets are not in a dangerous situation. He thus notes no general accumulation of excessive indebtedness in the economy, which would be worrying from the point of view of the financial stability of the country.

In its latest projections, made in September, the Fed expects US GDP growth of 2% in 2020 and 1.9% in 2021, forecasts that coincide globally with those of economists. According to the consensus compiled by ‘Bloomberg’, the latter forecast an average growth of 1.8% in 2020, then 1.9% in 2021.

In the US bond markets, the price has risen (investors taking refuge in investments considered less risky), lowering interest rates, which move in the opposite direction of prices. 10-year T-Bond yield fell 6 basis points to 1.82%, after already losing 6 bps the day before. This rate had fallen to 1.53% a month ago amid fears of a recession, before rebounding sharply up to 1.92% last week thanks to the easing on the trade front, and after the Fed signaled a pause in its down cycle.

Oil was down slightly on Thursday after a stronger than expected rise in commercial oil stocks in the United States. They rose about 2.2 million barrels last week, while analysts expected a more modest increase of 1.65 mb.

In response, the price of a barrel of US light crude (WTI) fell 0.39% to $56.90 on the Nymex (December futures contract), of the North Sea dropped 0.14% to $62.28 (January futures contract).

The ounce of gold returned 0.52% on the Comex market, to $1,470.90 for the December futures contract, after suffering a sharp correction of 3% last week.

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I am a lecturer at the University of Economics in Bratislava, department of Banking and International Finance. I have a Ph.D. academic degree, my dissertation was focused on major markets. Commodities and stock markets are also the main focus of my research and publication activities. I have approximately 10 years of investing experiences. My investments mostly focus on small- to mid-cap companies of energy sector, financial and technology.