We are cautious after the DXY Index’s 0.4% rise to a significant resistance level around 103.30 (100-day moving average) overnight. This month’s rise in the US Treasury 2Y and 10Y yields appeared to have stalled at 4.00% and 4.10%, respectively. Fed officials are looking to deliver the two rate cuts they projected for the FOMC meetings in November and December. They also persuaded markets against expecting another 50 bps cut at either meeting with the futures market pricing 25 bps reductions. On October 31, consensus sees US PCE inflation falling to 2.1% YoY in September from 2.2% in August, another step closer to the 2% target. Contrary to the rise in CPI core inflation, PCE core inflation is expected to fall to 2.6% from 2.7%.
The greenback’s appeal should wane from improving risk appetite. As the upside the risks in oil prices and US bond yields eased, the Dow Jones Industrial Average and S&P 500 indices rose to new lifetime highs. Brent crude oil prices retreated a second day by 2% to USD77.46 per barrel overnight. Middle East fears subsided after the Washington Post reported Israeli Prime Minister Benjamin Netanyahu telling President Joe Biden that Israeli strikes on Iran would focus on military targets and avoid oil or nuclear facilities. Brent has been consolidating in a USD75-80 range after China returned from its Golden Week holiday and failed to inspire investors with its stimulus plans. Despite the disappointment, the offshore USD/CNH rate has been capped at 7.10 since October 4.
In Southeast Asia, the Monetary Authority of Singapore’s decision to maintain the status quo on its SGD NEER policy did not push USD/SGD out of its 1.3050-1.3100 range. However, USD/THB entered a lower 33.10-33.35 range after breaking below its 33.40-33.60 range last Friday. The Bank of Thailand is expected to keep its policy rate unchanged at 2.50% tomorrow. Similarly, USD/IDR is also looking to trade below its 15580-15710 range ahead of a hold decision by Bank Indonesia tomorrow. Meanwhile, USD/MYR and USD/VND were capped at 4.30 and 24850, respectively, over the past week. On October 18, Malaysia’s Budget 2025 is expected to balance economic growth with targeted measures to address the cost-of-living challenges while maintaining fiscal discipline, according to the Malaysian Institute of Economic Research. Vietnam’s GDP growth was higher-than-expected at 7.4% YoY in 3Q24 vs. 6.9% in the previous quarter, while CPI inflation was lower-than-expected at 2.6% YoY in September vs. 3.45% a month ago.
Quote of the day
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
Abraham Lincoln
October 15 in history
In 1860, 11-year-old Grace Bedell wrote to Abraham Lincoln telling him to grow a beard.
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