Gold holds firm after US Fed rate cut, softer dollar

Gold prices rose more than 1% on Thursday, helped by a retreat in the US dollar, while the Federal Reserve cut interest rates by a quarter of a percentage point as widely expected.

Spot gold was up 1.2% at USD 2,691.36 per ounce as of 2:22 p.m. EST (1919 GMT), after dropping to a three-week low on Wednesday. US gold futures settled 1.1% higher at USD 2,705.80.

At the end of a two-day policy meeting, the US central bank lowered the benchmark overnight interest rate to the 4.50%-4.75% range, with policymakers taking note of a job market that has “generally eased”.

Lower US interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.

“Gold remains in a strong bull market and no event this week, from the election to today’s Fed decision, is likely to change that,” said Tai Wong, an independent metals trader.

“Unless Powell leans towards a pause today, gold is likely to take back yesterday’s knee-jerk losses,” Wong added.

The dollar index was down 0.6% against its rivals after rising to a four-month high after Republican former President Donald Trump’s win in Tuesday’s presidential election.

Traders are currently pricing in another 25 basis point cut by the Fed in December, according to LSEG data.

Investors now look forward to comments from Fed Chair Jerome Powell’s press conference due at 2:30 p.m. ET for more cues on monetary policy path.

With Trump’s impending return to power, “any future rate reductions could well be more difficult to achieve due to concerns that higher prices and stickier inflation force central banks to keep policy restrictive for longer than they would like,” independent analyst Michael Hewson wrote in a note.

Elsewhere, spot silver rose 1.8% to USD 31.71 per ounce, platinum gained 0.6% to USD 992.65 and palladium shed 1.3% to USD 1,021.25.

(Reporting by Brijesh Patel, Sherin Elizabeth Varghese, and Anjana Anil in Bengaluru; Editing by Paul Simao, Susan Fenton, Vijay Kishore, and Mohammed Safi Shamsi)

Oil rises 1% as investors digest US election fallout

NEW YORK – Oil prices rose nearly 1% on Thursday as the market weighed how President-elect Donald Trump’s policies would affect supplies and as drillers cut output while bracing for Hurricane Rafael.

A strong dollar and lower crude imports in China limited gains.

On Wednesday, the election of Republican former President Trump initially triggered a sell-off that pushed oil down more than USD 2 as the dollar rallied. Crude prices later pared losses to settle down by less than 1%.

On Thursday, Brent crude oil futures settled up 71 cents, or 0.95%, at USD 75.63 a barrel. US West Texas Intermediate (WTI) crude rose 67 cents, or 0.93%, to USD 72.36.

Prices gained support on expectations that Trump’s incoming administration may tighten sanctions on Iran and Venezuela, said Andrew Lipow, president of Lipow Oil Associates, adding that this could take oil supply off the market.

“The market is now looking into what Donald Trump’s policies might be and the market is reacting to that prospect,” said Lipow.

In his first term, Trump put in place harsher sanctions on Iranian and Venezuelan oil. Those measures were briefly rolled back by the Biden administration but later reinstated.

Also supporting prices, the US Federal Reserve
cut interest rates
by a quarter of a percentage point at the close of its policy meeting on Thursday. Interest rate cuts typically boost economic activity and energy demand.

Actual, supply cuts also lent support. In the US Gulf Coast, over 22%, or 391,214 barrels per day, of crude oil production was shut in response to Hurricane Rafael, the US Bureau of Safety and Environmental Enforcement said.

The dollar index eased nearly 1% but remained near a two-week high after surging following Trump’s victory. A strong dollar makes oil more expensive for other currency holders and tends to weigh on prices.

Downward pressure also came from data showing crude oil imports in China fell 9% in October, the sixth consecutive month showing a year-on-year decline, as well as from a rise in US crude inventories.

(Reporting by Nicole Jao in New York and Alex Lawler in London; Additional reporting by Colleen Howe and Gabrielle Ng; Editing by David Goodman, David Gregorio and Leslie Adler)

‘Risk on’ as Powell signals Fed still on easing track

Asian markets on Friday round off a monumental week on the front foot after Federal Reserve Chair Jerome Powell on Thursday expressed confidence in the US economy and that inflation will continue to cool, signaling further interest rate cuts ahead.

In his press conference after the Fed cut rates by 25 basis points as expected, Powell said the economy could perform better next year than previously thought, and that inflation remains on a path back to the 2% target.

This added fuel to the US equity rally already underway following Donald Trump’s thumping victory in the US presidential election on Tuesday, pushing the three main US indices to new all-time highs.

The equity rally was also aided by lower Treasury yields and a weaker dollar – the 10-year yield fell 10 basis points for its biggest one-day fall in three months, and the dollar shed 0.7%.

Asian stocks ex-Japan go into Friday’s session up almost 2% on the week, which would be the biggest rise in five weeks. Over the month of October though, outflows rose sharply.

Japan’s Nikkei is up 3.5%, on course for its best week in six. Many analysts are increasingly bullish on Japanese stocks, citing attractive valuations and an assumption that the yen stays weak.

The outlook for Asian stocks in a Trump world more broadly, however, is mixed.

On the one hand stronger demand and a buoyant Wall Street are positive forces for emerging Asia. But on the other, a stronger dollar and higher US bond yields could tighten financial conditions and encourage capital outflows from some countries.

Chinese stocks, in particular, are vulnerable. But as SocGen analysts note, the threat of punishing tariffs from Washington could accelerate more forceful policy responses from Beijing, which may end up supporting local stocks.

Meanwhile, attention in Asia turns to China as investors await a readout from the National People’s Congress Standing Committee meeting which concludes on Friday. Any stimulus surprise from the meeting will likely help lift market sentiment in China stocks.

The yuan on Thursday bounced back a bit from the three-month low struck the previous day. The yuan’s fall on the spot market of around 1% on Wednesday, an immediate reaction to Trump’s election win, was its biggest decline since February 2020.

Investors will also cast an eye to Chinese inflation data on Saturday. Strong exports data on Thursday offered encouraging signs that growth may be recovering, but imports fell short of forecasts, suggesting domestic demand remains weak.

The annual rate of consumer inflation is expected to have held steady at 0.4% in October, according to a Reuters poll, while producer price deflation is seen easing only a little to -2.5% from -2.8%.

Here are key developments that could provide more direction to markets on Friday:

– Taiwan trade (October)

– Japan household spending (September)

– China NPC Standing Committee readout

(Reporting by Jamie McGeever; Editing by Deepa Babington)

Politics can still shock the dollar: McGeever

ORLANDO – Politics is often a major driver of exchange rates in emerging economies where elections, leaders and government policies can play a big role in shaping trade and investment flows. That’s not often the case for major currencies in markets with much deeper investment flows and liquidity – like the US dollar.

But the greenback’s explosive rally following the US presidential election shows that politics still matter for the dollar – a lot. Or more accurately, the dollar is still highly sensitive to political shocks.

The dollar surged nearly 2% against a basket of major currencies early on Wednesday, following Republican Donald Trump’s thumping win over Democrat Kamala Harris in Tuesday’s election.

This marked the dollar’s biggest one-day rise in more than eight years, since June 24, 2016, to be precise. That was the day after another historic, political drama played out: the “Brexit” referendum in the UK, when Britons dumbfounded pollsters and voted to leave the European Union.

Sterling’s 8% plunge on that day – by far its biggest decline against the dollar since the era of free-floating exchange rates began over 50 years ago – lifted the dollar index by 2%.

Trump’s victory was far less shocking than the Brexit vote, and financial markets had been pricing it in for weeks. But the dollar’s sharp reaction suggests that the margin of victory, and the likelihood that Republicans would take control of both houses of Congress, caught markets off guard.

Steven Englander, head of G10 FX strategy at Standard Chartered, reckoned a potential for “clean sweep” combined with the polarized nature of politics today help explain the dollar’s outsized move.

“So much in politics is ‘same old, same old’, but when you get a real surprise the market reaction can be dramatic,” he noted.

MOMENTUM

The dollar rarely fluctuates anywhere close to 2% in one day because vast flows are required to move such a heavily traded asset that much. The greenback is on one side of almost 90% of all foreign exchange trades, and the global FX market’s average daily turnover is USD 7.5 trillion.

The dollar has racked up daily gains of around 1.5% since 2016, but they were mostly clustered in the highly volatile days of March 2020 at the onset of the pandemic or in September 2022 when US interest rates were close to reaching their 40-year peak.

Declines of that magnitude have also been rare. They occurred either around the pandemic or when soft inflation data was released in November 2022.

But the 2024 US presidential election, like Brexit, is a reminder that political shocks can still have an instant impact on the world’s more liquid currencies, including the most widely used and liquid of all.

The bigger question may be: Do such extreme moves have long-term effects? And the answer is, they can.

Sterling has never regained its pre-June 2016 heights. It is still down 10% against the dollar and down 25% on a trade-weighted basis, meaning Britain has effectively suffered a permanent loss of global purchasing power.

Of course, the likelihood of the dollar embarking on a near-decade-long global rally is slim. Far too many domestic and global variables would have to align for that to happen.

But investors do appear to be pricing in expectations that the new administration’s fiscal and monetary policy will push inflation, bond yields, and the dollar higher.

Mizuho’s FX strategy team says the dollar has potentially another 4% of upside before it eclipses its gains in 2016 after Trump won the presidency then.

Barclays analysts agree that the dollar has more room to strengthen “either a little or a lot … depending on whether the Republicans manage a sweep”. They believe the latter scenario could push the euro down to USD 1.03 in the near term.

It’s impossible to predict exactly what will happen, but investors are being reminded now that even in such a liquid market, political shocks can still move the dollar.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Cynthia Osterman)

Oil settles lower as US dollar surges, investors take stock of Trump victory

HOUSTON – Oil prices settled lower on Wednesday as investors weighed a strong US dollar against the potential that US President-elect Donald Trump’s foreign-policy plans could squeeze global oil supply.

Brent crude oil futures settled down 61 cents, or 0.81%, at USD 74.92 per barrel. US West Texas Intermediate (WTI) crude settled down 30 cents or 0.42%, to USD 71.69.

Trump’s election triggered a large sell-off that pushed oil prices down by more than USD 2 per barrel during early trade as the US dollar rallied, currently at its highest level since September 2022.

A stronger dollar makes greenback-denominated commodities such as oil more expensive for holders of other currencies and tends to weigh on prices.

“All the excitement and initial selling enthusiasm has since waned, and I think there is more upside rather than downside in the short term,” said Phil Flynn, senior analyst at Price Futures Group, noting that investors on Wednesday looked more at the short-term supply, demand outlook.

“There was an over-reaction to the election results, and that a Trump victory could have caused the US industry to sort of drill itself into oblivion and cause a glut,” said John Kilduff, partner at Again Capital in New York.

“But cooler heads have prevailed and this market has a lot of problems on its hands,” he added, citing the war in the Middle East as a supportive factor because it could weigh on supply.

Trump’s reelection could also mean the renewal of sanctions on Iran and Venezuela, removing barrels from the market, which would be bullish, UBS analyst Giovanni Staunovo said.

Iran is an OPEC member with production of around 3.2 million barrels per day, or 3% of global output.

However, a crackdown on Iran may be more difficult as the country has become adept at evading sanctions, Alex Hodes, oil analyst at brokerage firm StoneX, said in a note.

Trump’s support for Israeli Prime Minister Benjamin Netanyahu could heighten instability in the Middle East, according to Andrew Lipow, president of Lipow Oil Associates.

That could boost oil prices as investors price in a potential disruption to global oil supplies. Trump is expected to continue arming Israel.

But setting aside the US election and geopolitical uncertainties, persistent trends in oil markets are likely to shape the outlook ahead, Mukesh Sahdev, global head of commodity markets, oil at Rystad Energy, said in a note.

OPEC+ still pulls the strings, refinery margins battle weaker demand, and higher supply and oil trade flows continue to battle inefficiencies, according to Sahdev.

US crude oil, gasoline, and distillate inventories rose last week, the US Energy Information Administration said.

Crude inventories climbed by 2.1 million barrels to 427.7 million barrels in the week ending Nov. 1, the EIA said, compared with analysts’ expectations in a Reuters poll for a 1.1-million-barrel rise.

(Reporting by Georgina McCartney in Houston, Arunima Kumar in Bengaluru, Katya Golubkova in Tokyo, and Emily Chow in Singapore; additional reporting by Alex Lawler in London; Editing by Louise Heavens, Alexander Smith, David Evans, David Gregorio, Rod Nickel, and Leslie Adler)

Gold hastens retreat as dollar rallies on Trump victory

Gold prices slid to a three-week low on Wednesday, as investors piled into the US dollar after Republican Donald Trump was elected US president.

Market participants were also looking ahead to the Federal Reserve’s interest-rate decision on Thursday for further clues on the bank’s easing cycle that had helped gold’s stunning rally to successive record highs this year.

Spot gold was down 2.8% at USD 2,667.19 per ounce, as of 2:07 p.m. ET (1907 GMT), after hitting a three-week low of USD 2,652.19. The metal was on track to post its biggest daily loss in five months.

US gold futures settled 2.7% lower at USD 2,676.30.

“A clear presidential victory when the market has been pricing in a contested result, removal of an element of risk, Trump trades include the dollar’s strengthening this morning and the combination of the two has brought gold lower,” said StoneX analyst Rhona O’Connell.

Trump recaptured the White House by securing more than the 270 Electoral College votes needed to win the presidency, Edison Research projected.

Investors said Trump’s presidency will bolster the dollar, causing the Federal Reserve to pause its easing cycle if inflation takes off after expected new tariffs.

The dollar index hit a four-month high, making bullion more expensive for overseas buyers.

The risk of rising inflation could slow the pace of US rate cuts as tariffs roll out, said Ole Hansen, head of commodity strategy at Saxo Bank.

“The (Federal Open Market Committee) will likely still cut on Thursday but the subsequent language will be studied closely for signs of a pause.”

Investors widely expect the Fed to announce a quarter-point rate cut after 50-bps reduction in September.

Commodities from oil and gas to metals and grains dropped as the dollar rallied.

Spot silver fell 4.4% to USD 31.24 per ounce. Platinum shed 0.8% to USD 991.60 and palladium was down 3.4% at USD 1,039.43. All three metals hit their lowest levels in three weeks.

(Reporting by Anjana Anil, Sherin Varghese, and Anushree Mukherjee in Bengaluru; Editing by Veronica Brown, Sharon Singleton, Shilpi Majumdar, and Rod Nickel)

India’s stock market has a rising local flavour

SINGAPORE – Swiggy is living up to its reputation for doing things quickly. The Indian food and grocery delivery company backed by Prosus and SoftBank Group will on Wednesday start taking orders for its USD 1.35 billion Mumbai initial public offering. It’s shrugging off the volatility US elections could induce in markets. The timing reflects both the issuer’s urgency and the increasing role of domestic investors in the USD 5 trillion stock market.

There are a couple of reasons to rush. Swiggy’s largest rival, publicly traded Zomato, is planning to raise up to USD 1 billion in a secondary equity offering. The USD 25 billion company is cashing up ahead of an entry by Mukesh Ambani’s giant conglomerate Reliance Industries into “quick-commerce”, the home delivery of grocery items within 10 minutes or so. What’s more, India’s economic growth is slowing and consumption signals are starting to flash red.

For its part, Swiggy has scaled back its ambition. Its targeted market value of USD 10.4 billion at the upper end of the price range is less than the headline figure of its last fundraising round in 2022. And it equates to a multiple of 6.6 times forward sales after annualizing revenue during the three months to the end of June, or nearly half the multiple of Zomato. Nonetheless, Swiggy’s shrinking premium in the grey market – a metric Indian media love to shout about – implies a muted debut when the stock officially debuts around Nov. 13.

Issuers can at least rely on a local cushion. Indians continue to pump their savings into the market at a time when overseas investors are cashing out: foreigners sold a monthly record USD 11 billion of stock in October, taking the Nifty 50 benchmark down 6%, though companies still trade on average at a punchy 24 times forward earnings. The downward drag would have been greater in the past. Foreign ownership of stocks at 17.5% is near a 12-year low, according to data provider Primeinfobase. That makes the timing of Swiggy’s share sale look slightly less bold.

CONTEXT NEWS

Indian food and grocery delivery company Swiggy will on Nov. 6 start accepting orders from retail investors for shares in its initial public offering.

The Prosus and SoftBank-backed company is seeking to raise up to USD 1.35 billion at a valuation of up to USD 10.4 billion at the upper end of the marketed price range, per a term sheet seen by Breakingviews.

(Editing by Una Galani and Aditya Srivastav)

Bracing for higher US yields, dollar, inflation

Investors in Asia wake up on Thursday to a global market landscape redrawn by Donald Trump’s resounding US election victory that has propelled Wall Street to new highs and sparked a huge surge in the dollar and US bond yields.

Any appetite for ‘risk on’ trades in sympathy with the US equity rally will be largely offset, perhaps completely snuffed out, by tighter financial conditions from the rise in Treasury yields and the dollar.

Emerging market currencies fell across the board in Wednesday’s global session – Mexico’s peso slumped as much as 3% before recovering – and Asian exchange rates could come under heavy selling pressure on Thursday too.

Depending on the speed and extent of the selloff, some central banks may feel forced to intervene. The central banks of India and Indonesia, for example, have intervened in the FX market already this year to support their weak currencies.

At one point earlier on Wednesday the US dollar was up nearly 2% on an index basis, which would have been its biggest one-day rise since June 24, 2016 – the day after the Brexit referendum, which sank sterling.

The dollar gave back some gains and Treasuries clawed back some of their heavy losses late on Wednesday, as the huge spike in yields attracted strong demand at an auction of 30-year bonds.

Will investors in Asia on Thursday stick with the so-called ‘Trump trades’ – bets linked to higher federal spending, deficits and inflation, and greater deregulation – or will they exert restraint, and await more attractive levels to re-enter?

Among the biggest moves of Wednesday’s session was bitcoin’s rise of almost 10% to a record high of USD 75,459 as investors bet on the Trump administration implementing policies that will help cement cryptocurrencies’ place in the financial ecosystem.

As if the US election tumult wasn’t enough, the Federal Reserve announced its interest rate decision on Thursday after a two-day meeting. This could provide investors with the cover to reduce risk exposure and trade more defensively on Thursday.

Perhaps fittingly, the first full day of market trading in Asia following Trump’s victory sees the release of Chinese trade and foreign exchange reserves data.

China has been the main target of Trump’s fiery rhetoric about global trade and how the US has suffered from unfair practices practiced by Beijing. He has said imports from China will be subject to tariffs of 60%, perhaps even higher.

Official figures on Thursday are expected to show that export growth accelerated in October to an annual rate of 5.2%, boosted by steep discounts, while imports likely shrank 1.5%, according to a Reuters poll.

Thursday’s calendar also includes the latest Australian trade figures, GDP data from the Philippines, and second-quarter earnings from Japan’s Nissan.

Here are key developments that could provide more direction to markets on Thursday:

– Further reaction to US presidential election

– China trade (October)

– Philippines GDP (Q3)

(Reporting by Jamie McGeever; Editing by Diane Craft)

Gold rises as markets gird for US election outcome

Gold prices edged up on Tuesday as investors braced for political tensions after opinion polls showed Donald Trump and Kamala Harris are neck and neck in the US presidential election where chances of a contested result are high.

Spot gold gained 0.2% to USD 2,740.96 an ounce by 01:54 p.m. ET (1852 GMT). US gold futures settled 0.1% higher at USD 2,749.70.

Gold is supported by “the uncertainty of the elections. Part of it is what happens if things don’t go so smooth, part of it is the possibility of tariffs, some kind of economic changes,” said Daniel Pavilonis, senior market strategist at RJO Futures.

With a dead heat between Republican former President Trump and Democratic Vice President Harris and control of the US Congress also at stake, investors are particularly nervy about an unclear or contested result, especially if it fuels unrest.

“Should the election result be uncertain for days or even weeks, gold would benefit from the resulting uncertainty,” Commerzbank said in a note.

Trump has repeatedly said any defeat could only stem from widespread fraud, echoing his false claims from 2020. The winner may not be known for days if the margins in key states are as slim as expected.

Gold should ultimately reach USD 2,800 “once the dust settles” after the election, Exinity Group Chief Market Analyst Han Tan said.

Elsewhere, markets widely anticipate a quarter-point cut from the Federal Reserve on Thursday, a further reduction to US interest rates this year after a big cut in September.

Bullion is traditionally seen as a hedge against economic and political uncertainty, and tends to thrive when interest rates are low. This has helped the metal rise nearly 33% so far this year.

Spot silver rose 0.4% to USD 32.59 an ounce, platinum added 1.5% to USD 998.35 and palladium was down 0.2% at USD 1,072.50.

A private sector survey in top metals consumer China showed services activity expanded at its fastest pace in three months in October.

(Reporting by Anjana Anil and Anushree Mukherjee in Bengaluru; Editing by Sharon Singleton, Andrea Ricci, Chris Reese and Mohammed Safi Shamsi)

The waiting is over … almost

Investors in Asia are bracing for a day of potential high drama and volatility on Wednesday as the outcome of Tuesday’s US presidential election begins to emerge.

Whether the final result is known in Asian hours remains to be seen – that could take days if the count in certain key swing states is tight – but the yen, gold, dollar, and Treasury futures could be most sensitive to election-related swings in sentiment.

Wednesday’s trading in Asia may ultimately be marked by volatility and uncertainty, but markets may open on a solid footing after a strong reading of US service sector activity sparked a broad-based rally on Wall Street on Tuesday.

The three main US equity indices rose at least 1.00%, while gauges of implied stock market volatility remained subdued. US equity investors, at least, went into election day in a reasonably upbeat mood.

The dollar weakened significantly and US bond yields also rose, which is often a bad combination for Asian and emerging markets. Implied US bond market volatility remains elevated too, with the “MOVE” index at its highest in a year.

Currency market volatility is also high. A broad measure of G10 FX implied “vol” is hugging the 18-month high struck last week, while one-week dollar/Mexican peso implied vol is at the highest since March 2020 and one-week implied vol for China’s offshore yuan is at a record high.

The Mexican peso and Chinese yuan are two currencies that could be hit hardest by extra trade restrictions and import tariffs imposed by Washington, a scenario most likely to play out if Donald Trump wins the election.

Investors will also be sensitive to the announcement of any economic support measures from China’s Standing Committee of the National People’s Congress that is convening this week in Beijing.

Shanghai stocks closed at a four-week high on Tuesday, boosted by upbeat comments from Premier Li Qiang on China’s recovery and improving economic data. Services activity expanded in October at the fastest pace in three months, a private survey on Tuesday showed.

The Asian calendar on Wednesday, meanwhile, includes an interest rate decision from Malaysia, inflation data from Taiwan and Thailand, and services PMI data from Japan and India.

The Bank of Japan releases minutes of its September policy meeting, and Reserve Bank of India Governor Shaktikanta Das speaks, while on the corporate front, the world’s largest automaker Toyota releases second-quarter results.

Toyota is expected to post a quarterly operating profit of almost USD 8 billion, marking its first profit drop in two years and signaling cooler demand after a run of robust earnings helped by a consumer shift away from electric vehicles.

Here are key developments that could provide more direction to markets on Wednesday:

– Reaction to US presidential election result

– Malaysia central bank decision

– Japan services PMI (October)

(Reporting by Jamie McGeever; Editing by Lisa Shumaker)

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