Metals and Oil Retreat as Dollar Rally Continues (18-22 November)

The DXY rallied nearly 2% last week, marking its seventh consecutive weekly gain and testing the 107 level.

Following Donald Trump's election, expectations of a weaker euro and inflationary US policies strengthened the Dollar Index. The euro ended the week at its lowest level against the dollar in a year, while the pound hit a 13-week low, pressured by weak growth data and the strong DXY. The Japanese yen fell to a nearly four-month low, with GDP data showing two consecutive quarters of growth but little market impact. Expectations for a 1% rate hike by the Bank of Japan in late 2025 remain unchanged.

It was a week of pullbacks in the precious metals market. Both gold and silver experienced significant declines, with silver maintaining relative strength. As a result, the gold-to-silver ratio tested 83.80. Crude oil finished the week with a pullback of approximately $2.

US 10-year and 2-year Treasury yields closed the week with gains of 3% and 2%, respectively, driven by the impact of the Trump trade.

German CPI

Germany's annual inflation rate rose to 2.0% in October 2024 from 1.6% in September, the highest in three months and in line with initial estimates. Services inflation increased to 4.0% (from 3.8%), food prices rose to 2.3% (from 1.6%), and goods prices rebounded to 0.4% (from -0.3%). Energy costs fell 5.5%, slowing from a 7.6% drop in September, driven by smaller declines in heating oil (-13.4% vs -17.9%) and household energy (-3.2% vs -4.0%). Electricity and natural gas prices fell 5.5% and 0.8%, respectively. Core inflation, excluding food and energy, increased to 2.9% from 2.7%. The CPI rose 0.4% month-on-month, reversing September’s flat reading, while the EU-harmonised CPI accelerated to 2.4% year-on-year (from 1.8%) and 0.4% month-on-month (from -0.1%).

US PPI

The Producer Price Index (PPI) for final demand rose 0.2% in October, following increases of 0.1% in September and 0.2% in August, according to the U.S. Bureau of Labor Statistics. On an unadjusted basis, the PPI increased 2.4% over the past 12 months. October's rise was largely driven by a 0.3% increase in final demand services, while final demand goods edged up 0.1%. Excluding food, energy, and trade services, the PPI rose 0.3% in October after a 0.1% increase in September, with a 12-month rise of 3.5%.

US CPI

The US annual inflation rate rose to 2.6% in October 2024, up from 2.4% in September, marking the first increase in seven months and aligning with market expectations. The rise was driven by a slower decline in energy costs (-4.9% vs. -6.8%), with smaller drops in gasoline (-12.2% vs. -15.3%) and fuel oil (-20.8% vs. -22.4%), while natural gas prices remained up 2%. Shelter inflation held steady at 4.9%. Food inflation eased to 2.1% (from 2.3%), transportation inflation slowed to 8.2% (from 8.5%), and prices for new vehicles fell -1.3%, while used cars and trucks saw a smaller decline (-3.4% vs. -5.1%).

On a monthly basis, the CPI rose 0.2%, the same as the prior three months. Shelter, up 0.4%, accounted for over half of the increase. Core inflation, excluding food and energy, remained at 3.3% annually and 0.3% monthly.

UK GDP

The UK economy grew 0.1% quarter-on-quarter in Q3 2024, down from 0.5% in Q2 and below the 0.2% forecast. Services rose 0.1%, led by professional activities (0.7%) and retail trade (0.6%). Construction grew 0.8%, while production fell 0.2% due to a 2.7% drop in electricity and gas supply.

Net trade boosted growth as exports fell 0.2% and imports dropped 1.5%. Household spending rose 0.5%, driven by housing and clothing, while business investment increased 1.2% and government consumption 0.6%. Gross capital formation declined due to lower acquisition of valuables.

Year-on-year, the economy grew 1%, up from 0.7% in Q2.

Eurozone GDP

The Eurozone's GDP grew 0.4% quarter-on-quarter in Q3 2024, its strongest expansion in two years, after a 0.2% rise in Q2, matching forecasts. Germany avoided recession with 0.2% growth following a revised 0.3% contraction in Q2. Growth improved in France (0.4% vs. 0.2%), Estonia (0.1% vs. 0%), Cyprus (1% vs. 0.1%), Slovenia (0.3% vs. 0.1%), Finland (0.4% vs. 0.2%), and Lithuania (1.1% vs. 0.3%).

Ireland rebounded sharply with 2% growth after a 1% contraction, and Austria grew 0.3% after flat growth. Spain maintained resilience with a 0.8% increase, while Portugal and Slovakia both grew 0.2% and 0.3%, respectively, matching Q2. Italy's economy stagnated after 0.2% growth, and Latvia’s contraction deepened to -0.4% (vs. -0.3%). Growth slowed in Belgium (0.2% vs. 0.3%) and the Netherlands (0.8% vs. 1.1%). Year-on-year, the Eurozone economy grew 0.9%, its best performance since Q1 2023.

US Retail Sales

US retail sales rose 0.4% month-over-month in October 2024, following a revised 0.8% increase in September and beating expectations of 0.3%. Electronics and appliance stores led gains (2.3%), followed by auto dealers (1.9%), food services (0.7%), and building materials (0.5%). Sales also rose at non-store retailers (0.3%), general merchandise (0.2%), food and beverage stores (0.1%), and gasoline stations (0.1%).

Declines were seen at miscellaneous retailers (-1.6%), furniture stores (-1.3%), sporting goods and book stores (-1.1%), and clothing stores (-0.2%).

Currencies

The DXY rose nearly 2% last week, its seventh consecutive gain, testing the 107 level. The euro fell to a one-year low, and the pound dropped to a 13-week low on weak growth data.

The yen hit a four-month low despite two quarters of GDP growth, with a 1% Bank of Japan rate hike expected in H2 2025. The yuan reached a three-month low despite strong retail sales, four-month low unemployment, and industrial growth. The central bank injected CNY 981 billion, its largest since 2020, to boost liquidity.

The Canadian dollar hit its lowest since 2020 due to trade concerns, falling oil prices, and weak Chinese demand. Strong PMI and lower unemployment eased rate-cut fears. The Australian dollar also weakened, hurt by falling commodities and steady rate comments from RBA Governor Bullock.

Commodities

Gold and silver fell last week as expectations of prolonged higher Fed rates and weaker Chinese demand spurred sell-offs. Silver outperformed, lowering the gold-to-silver ratio after three weeks of gains.

Crude oil dropped amid oversupply concerns, with the IEA forecasting a surplus next year due to weaker Chinese demand and higher production. US crude inventories rose by 2.1 million barrels, above the 1.9 million forecast, adding to the pressure.

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