The dollar seems to be benefiting from a clear rebound in its yield: US T-Bonds are showing +8.5 to +9pts of yield, returning to their highest levels since July 31… and symmetrically, the ‘$-Index’ is up +0.3% at 103.83, its best mark since… August 1 (intraday).
The euro, for its part, widened its decline after the press conference that followed the ECB meeting (held in Ljubljana, Slovenia).
It lost 0.35% against the dollar to 1.0822, its lowest level since August 1.
The main currencies showed mixed trends against the greenback, with the yen down -0.4% and the pound up +0.15% (to 1.3010)…. but the Swiss franc, down -0.1%, gained more than 0.2% against the euro.
As expected, the European Central Bank (ECB) finally brought its strategy into line with market expectations by cutting rates again (-25pts to 3.25% on the ‘Repo’).
At her press conference, Christine Lagarde was cautious about the timing of future rate cuts (the ECB remains ‘data dependent’), but did hint at ‘signs of a slowdown’ in activity.
As it happens, the ECB has always given priority to inflation (‘on the right track’ with +1.7% confirmed in the Eurozone), and the markets expect it to make growth its priority… and a ‘semantic’ step in this direction seems to have been taken (synonymous with further stimulus measures).
Recent indicators, in particular the latest PMI indices, have highlighted the slowdown in the European economy, accentuated by Germany’s current difficulties.
October 1st.
It was another busy day in the USA: the session was dominated by a deluge of US stats, but one in particular – retail sales – seems to have had a clear impact on the fixed-income markets: the trend was already negative before the first publications at 2:30 p.m., and the losses widened significantly between 2:30 and 6:30 p.m. The yield on the ’10 yr’ is now at a record low.
The 10-year yield jumped +8pts to 4.095%, returning to its worst levels since the end of July, while the 30-year yield soared +9pts to 4.388%.
US retail sales rose by 0.4% sequentially in September, according to the Commerce Department (after +0.1% in August), and by +0.5% excluding vehicles and equipment.
On a quarter-on-quarter basis, US retail sales rose by 1.3% over the third quarter as a whole, including a 1.1% increase excluding the automotive sector.
US industrial production, on the other hand, fell by -0.3%, symmetrically to August’s +0.3% (revised from +0.8%).
The Fed, which publishes these figures, explains that the strike at ‘a major civil aircraft manufacturer’ (i.e. Boeing) reduced industrial production by around 0.3% in September, and that the effects of two hurricanes also subtracted around 0.3%.
Also according to the Federal Reserve, the capacity utilization rate in US industry deteriorated by 0.3 points to 77.5% in September, a level 2.2 points below its long-term average (1972-2023).
After rising for two weeks, weekly jobless claims in the US fell again last week, a further sign of the resilience of the US labor market.
Manufacturing activity in the Philadelphia region rose much more than expected according to the local Fed survey, with the Philly Fed diffusion index of general current activity rising from 1.7 in September to 10.3 in October, its second consecutive increase.
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