Global Gold Rises | Dollar Index Retreats from 18-Month High | Markets Await U.S. Inflation

Gold recovered part of its losses as the dollar index and bond yields pulled back. In the global currency market, the possibility of a temporary pause in Japan's interest rate hikes has become a new topic of debate among investors about the outlook for the yen.

world economy; Daniyal Rahimi; Markets have retraced some of Monday's move ahead of Wednesday's US inflation release. The price of oil, which had risen due to concerns about attacks in the Middle East and uncertainty about the agreement between Russia and Ukraine, fell today due to the prospect of Russian diesel supply and the development of the Saudi pipeline.

The dollar index also moved away from the 18-month peak and bond yields fell.

Gold benefited from the volatility, but the profitability of tech companies remained a concern.

Now the bank profit report and US inflation are the next tests of the market.

gold; Limited growth before the inflation test

An ounce of gold reached $4181.6 with an increase of about 0.24% compared to the end of the previous day.

The drop in the dollar index, the decrease in oil and the decrease in bond yields were the supporting factors for gold. Lower bond yields lower the opportunity cost of holding gold and give investors hope for the ounce.

However, higher-than-expected inflation could raise the possibility of interest rate hikes again and weaken this support.

oil; Hope for more supply against the risk of export disruption

Oil retreated after Monday's surge. Reuters and the Wall Street Journal have considered the prospect of more Russian diesel supply as one of the factors to reduce fuel shortage concerns; However, the damage to Russian refineries has made the implementation of this promise doubtful.

Meanwhile, Saudi Arabia has announced plans to increase its pipeline export capacity. The temporary conversion of a gas pipeline can increase oil transportation capacity by 1.2 million barrels per day within seven to eight weeks. This program is important for the export prospects, but it has not yet turned into the actual supply of oil in the market and has only temporarily affected the price.

Today, the dollar index retreated by 0.24% and reached 102.33. This index reached an 18-month high on Monday.

Demand for safe assets and concern in the Middle East supported yesterday's growth; The drop in oil and renewed attention to the path of interest rates changed the direction of the dollar today.

The euro gained about 0.24 percent to $1.11818, but concerns over France's debt and budget continued to overshadow its outlook.

In today's analysis, ING says that the market has almost fully anticipated the European Central Bank's interest rate hike in December; Therefore, fresh support for the euro is limited in this direction.

This bank reduced the forecast of Euro against the dollar for the last quarter of 2026 and the first quarter of 2027 to 1.13 and it still considers the possibility of testing the level of 1.11 in the short term.

ING also forecasts EUR/GBP in the 0.84-0.85 range for the next few months; France's problems and the possibility of a UK interest rate hike are in favor of the pound.

However, the bank considers the market's expectations of the rate increase in 2027 to be excessive. The UK budget on October 28 is also a risk ahead, although ING does not expect a lasting negative impact on the pound for now.

Japan; The possibility of a pause in interest rate hikes in October

According to a Bloomberg report, the officials of the Bank of Japan do not have much desire to raise rates in two consecutive meetings and will probably pause at the October 30 meeting. They want to investigate the effect of the September increase; Another increase in December is still possible, and the final decision is still undecided.

The American stock exchange has not yet opened. The S&P 500 closed down 0.06% at 7,807.24 and the Nasdaq closed down 0.44% at 27,245.90 on Monday.

Chinese company CXMT's progress report has raised concerns about competition and pressure on US chipmakers' profits. Sales pressure has also spread to Asia; Investors are worried that the heavy cost of investing in artificial intelligence will not translate into enough profit in the environment of high interest rates.

The US bond market has had two different paths in the past week. From October 6 to 13, the yield of one-month bonds increased from 3.943 to 4.042 percent; An increase equal to 9.9 basic units. The yields of three-month, six-month and one-year bonds have also increased by 3.9, 4.4 and 2.1 basis points, respectively.

But from the two-year maturity onwards, yields have declined. The two-year yield decreased by 2.8 basis points to 4.77% and the three-year yield decreased by 3.2 basis points to 4.892%. This drop was greater in five-year and seven-year bonds and reached 5.8 and 7.2 basis points, respectively. The biggest retreat occurred in long-term bonds: the ten-year yield decreased by 9.2 basis points to 5.194%, the 20-year yield decreased by 10 basis points to 5.602% and the thirty-year yield decreased by 10.3 basis points to 5.558%. As a result, the ten-year and two-year yield gap has decreased from 48.8 to 42.4 basis points and the slope of the curve has decreased.

In today's trading, the Wall Street Journal considered the drop in oil and the fall in artificial intelligence stocks to be factors in the increase in demand for bonds and the decrease in yields. Reuters also quoted Saxobank as saying that recent high yields have drawn buyers back into the market, but lingering inflation, high oil prices and heavy government borrowing still hinder a sustained recovery. Tomorrow's inflation report will be an important test for continuing to reduce yields.

For the meeting of October 28, Fedwatch shows the probability of rate stabilization at 80.6% and increase at 19.4%. The probability of increase has decreased by 1.6 percentage points compared to Monday.

Today's big bank profit report and US CPI tomorrow are the most important tests ahead. On Thursday, producer inflation, retail sales and oil inventories will be published; On Friday, Varash's words can clarify the market's perception of the path of monetary policy.