News about DXY

Mortgage holders should expect interest rates to stay higher for longer, as the RBA warns that competition for global capital from AI and data centre companies is pushing up the neutral interest rate. The cash rate of 4.6% is the highest in 15 years, and markets still almost fully price in another hike by mid-2027, even though expectations for a November increase have eased. Markets do not anticipate rates falling below current levels until at least mid-2028. Commonwealth Bank's Luke Yeaman argues that heavy government and AI spending makes rates less effective, with federal spending reaching 26.9% of GDP in 2025/26, the highest in 40 years excluding COVID-19. HSBC's Paul Bloxham has called for further spending cuts in the mid-year fiscal update expected in December.

Yields on 10-year Treasurys fell more than 2 basis points to 5.0729%, 30-year yields dropped 2 basis points to 5.4122%, and the 2-year note was broadly flat at 4.7273%. Yields eased even as inflation concerns persist, after strong Bureau of Labor Statistics data showed wholesale prices up 6.3% annually last month, the biggest jump since 2022, and consumer costs up 3.7% in September, beating estimates. Energy prices also fell as investors weighed the prospect of more Russian crude reaching the market, with WTI for November delivery down 2.05% at $99.33 a barrel and Brent down 2.65% to $106.99. Traders price an above-85% chance that the FOMC will keep borrowing costs unchanged at its Oct. 28 decision, according to the CME FedWatch tool.

Asian currencies traded flat to slightly higher on Monday while the dollar held steady after a 0.4% weekly fall that ended a four-week winning streak. The yuan reached its strongest level since July 2022, with onshore USD/CNY down 0.1% to 6.6816, after China's third-quarter GDP grew 4.5% year on year, beating the 4.4% forecast. September industrial output rose 5.5% and retail sales 1.1%, but property investment fell 20.6% in the first nine months and fixed-asset investment dropped 7.2%, which could limit the yuan's gains. The yen was near 158 per dollar amid intervention fears, while the rupee posted its strongest weekly performance in nearly four years after Reserve Bank of India measures to curb dollar demand. The Australian dollar gained 0.4% and the won strengthened 0.2% against the dollar.

Gold rose on Monday as investors scaled back expectations of another Federal Reserve rate hike in October following remarks from Fed Chair Kevin Warsh. Spot gold climbed 0.2% to $4,173.59 per ounce, silver, platinum and palladium also gained, and traders cut the probability of a 25-basis-point hike below 20%. Gold has held above $4,000 since August but remains about 20% below its level before the U.S.-Iran conflict began in February. ANZ sees fiscal concerns, Chinese demand and central bank diversification supporting gold over the longer term, while elevated yields and dollar strength limit near-term upside, and it forecasts bullion could exceed $5,000 per ounce in 2027.

Fed Chair Kevin Warsh declined to signal the central bank's next interest-rate move, saying he would not “prejudge” policy decisions. Speaking at the 2026 IMF and World Bank Annual Meetings, he described artificial intelligence as a “positive supply shock” for the economy over the medium term, though it is hitting demand first. He said the US is seeing a massive investment surge, though the trend is not equally visible across countries, and challenged the view that prolonged economic weakness is inevitable. Major brokerages expect a possible rate hike in December, while markets broadly expect the Fed to hold rates steady at its October 27-28 meeting.