Dollar’s Fall Halted at 98.4 Support Level Amid Mixed US Economic Data, as US-China Trade Talks Kick Off

Although the September US inflation data came in below market expectations at 0.1 percent, US jobless claims posted a three-week low of 210,000. The US economic indicators come after the release of the FOMC’s September meeting minutes, which unveils a debate among policymakers as to how much lower should US interest rates go.

Such mixed signals on the US economy, along with conundrum within the Fed, makes it difficult at this current juncture to fully determine the likelihood of a Fed rate cut in December. At the time of writing, the Fed funds futures price in an 82.2 percent chance of a 25-basis point cut at the end of this month, while there’s a 47.8 percent chance of a similar cut occurring in December.

The ongoing US-China trade talks could serve as a catalyst for the Dollar’s next major move, although investors will need a concrete outcome from the negotiating table.

Softer Dollar allows EURUSD to break above 1.10 for first time since September 25

The Euro was offered some reprieve by the weakening US Dollar, as EURUSD breached the psychologically-important 1.10 level for the first time in two weeks.

Just like the Fed, officials at the European Central Bank appear to be at odds with one another regarding its intended monetary stimulus package, judging by the contents of the just-released ECB’s September meeting minutes. Still, any upside for the Euro remains capped, given the dismal economic outlook for Europe that was further evidenced by the worse-than-expected industrial and manufacturing production data out of France in August and Germany’s contracting factory orders in the same month.

Gold poised for a major move as investors await outcome of US-China trade talks

The Dollar’s rebound prompted Gold to drop back below $1500, even as investors await the official result of the ongoing US-China trade talks. Overall, Bullion has adopted a wait-and-see approach in recent days, refusing to stray too far away from the $1500 line despite the mixed signals surrounding trade tensions over recent days. Gold prices have been relatively steady this week, anchored by the tense sentiment in the markets, but appears poised for a major move either way, pending the conclusion to the negotiations in Washington.

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