The dollar index (DXY00) rallied to a 1.75-month high today and is up +0.56%. The dollar has support today after the OECD raised its 2026 US GDP forecast and lowered its US inflation forecast. The dollar also has support on speculation that the Fed may keep tightening monetary policy after Fed Governor Michael Barr said, “further policy adjustments by the Fed are likely to be needed to ensure inflation comes down to target in a timely fashion.” The dollar added to its gains today on signs of US economic strength after the Sep S&P manufacturing PMI unexpectedly expanded at the fastest pace in 4.25 years.
US MBA mortgage applications fell -1.5% in the week ended September 18, with the purchase mortgage sub-index down -0.8% and the refinancing mortgage sub-index down -2.6%. The average 30-year fixed-rate mortgage rose +15 bp to a 2.25-year high of 7.12% from 6.97% in the prior week.
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The US Sep S&P manufacturing PMI unexpectedly rose +3.1 to 57.0, stronger than expectations of a decline to 53.7 and the fastest pace of expansion in 4.25 years.
The OECD raised its 2026 US GDP forecast by +0.2 to 2.2% from a June forecast of 2.0%. The OECD cut its 2026 US inflation forecast by -0.1 to 3.6% from a June forecast of 3.7%.
Markets are pricing in a 69% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.
EUR/USD (^EURUSD) tumbled to a 7-week low today and is down -0.55%. Dollar strength today is weighing on the euro. Euro losses are limited after the Eurozone Sep S&P manufacturing PMI and composite PMI rose more than expected. Also, hawkish comments today from ECB Governing Council member and Bundesbank President Joachim Nagel supported the euro when he said the ECB may have to raise interest rates further amid persistently high inflation. In addition, today’s action by the OECD to raise its 2026 Eurozone GDP and inflation forecasts is supportive of the euro.
The Eurozone Sep S&P manufacturing PMI was unchanged at 52.7, stronger than expectations of a decline to 52.6.
The Eurozone Sep S&P composite PMI unexpectedly rose +1.1 to 53.1, stronger than expectations of a decline to 51.7 and the fastest pace of expansion in 3.25 years.
ECB Governing Council member and Bundesbank President Joachim Nagel said Eurozone inflation is above 3% and is projected to stay above the ECB’s 2% goal for another year. Therefore, the ECB may have to raise interest rates to a level at which they hold back economic growth.
The OECD raised its 2026 Eurozone GDP forecast by +0.2 to 1.0% from a June forecast of 0.8%. The OECD also raised its 2026 Eurozone inflation forecast by +0.2 to 3.0% from a June forecast of 2.8%.
The markets are discounting a 59% chance of a +25 bp ECB rate hike at the ECB’s next policy meeting on October 29.
USD/JPY (^USDJPY) is up by +0.58% today. The yen tumbled to a 2.5-week low against the dollar today on dollar strength. Higher T-note yields are also weighing on the yen. The yen found some support today after the OECD raised its 2026 Japan GDP forecast. Moves in the yen may be exaggerated today amid below-normal trading activity, with markets in Japan closed for the Autumnal Equinox Day holiday.
The OECD raised its 2026 Japan GDP forecast to 0.8% from 0.6% in June.
Markets are pricing in an 18% chance of a +25 bp BOJ rate hike at the next policy meeting on October 30.
December COMEX gold (GCZ26) is down -60.10 (-1.37%) today, and December COMEX silver (SIZ26) is down -1.420 (-2.13%).
Precious metals prices are sharply lower today, pressured by a rally in the dollar index to a 1.75-month high. Also, hawkish central bank comments have pressured precious metals after ECB Governing Council member Joachim Nagel said the ECB may have to keep raising interest rates amid persistently high inflation, and Fed Governor Michael Barr said additional Fed rate hikes are likely to be needed to contain inflation.
Silver prices garnered some support today on signs of stronger global industrial metals demand after the OECD raised its 2026 GDP forecasts for the US, the Eurozone, and Japan. Also, today’s rise in the US Sep S&P manufacturing PMI to a 4.25-year high signals stronger industrial metals demand.
Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 6.5-month high on Monday. Long holdings in silver ETFs rose to a 5.75-month high on Tuesday.
Strong central bank demand for gold is supporting gold prices, after news last Monday that bullion held in China’s PBOC reserves rose by +650,000 ounces to 76.73 million troy ounces in August, the largest increase in three years and the twenty-second consecutive month the PBOC boosted its gold reserves.
Rich Asplund
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