Dollar and US Treasury yields fall

Following statements from Fed members on Tuesday, US Treasuries continued their November rally, while the dollar fell to its lowest level in 4 months.

The Bloomberg Dollar Index traded at 1,230, its lowest level since August.

The 2-year US Treasury yield fell 15 basis points on Tuesday to close at 4.7342 percent, before dropping to around 4.70 percent this morning. While the decline in the 5-year US Treasury yield has approached 24 basis points since the beginning of the week, the 10-year US Treasury yield has fallen by approximately 17 basis points during the same period.

Fed expectations pushed the price of an ounce of gold to a 6-month high. Oil also maintained its strength due to the Fed's influence and concerns regarding the OPEC+ meeting scheduled for November 30. Brent crude oil, which rose 2.13 percent on Tuesday, was trading just below 82 dollars per barrel, while WTI crude oil was trading slightly below 77 dollars per barrel.

S&P 500 futures are in positive territory.

EXPECTATIONS OF A ‘THIRD PASS’ FROM THE FED

Two officials from the American Central Bank, the Fed, signaled in their messages on Tuesday that interest rates could be kept steady in December, as they were in the previous two meetings.

Christopher Waller, one of the most hawkish Fed officials, stated that monetary policy is in a good position to return inflation to the Fed's 2 percent target, indicating that policymakers may not need to raise interest rates again.

Michelle Bowman said she would be willing to support interest rate hikes if the positive trend in inflation stalls, but she did not give a message indicating that she supports a hike at next month's interest rate meeting.

Although these statements do not fundamentally change expectations for the Fed's December meeting, Waller's comments, in particular, suggest that support among officials for a prolonged pause in policy is widening in an environment where signs of cooling economic activity, inflation, and the labor market are emerging.

Waller expressed that he is “increasingly confident” that monetary policy is currently well-positioned to slow the economy and return inflation to the 2 percent target.

Chicago Fed President Austan Goolsbee also said that this year has seen the strongest decline in inflation in 71 years. New York Fed President John Williams also stated that the decline in inflation is encouraging.

News Source: 12punto