The US dollar is falling sharply, and gold prices have risen to a one-week high.

US September retail sales only rose 0.2% MoM (expected 0.4%), core PPI increased 2.6% YoY (expected 2.7%), and the weak data has led the market to sniff out the scent of rate cuts—currently, the probability of the FOMC cutting rates by 25BP on December 9-10 has been priced in at 80%. US Treasury yields also fell, with the 10-year Treasury dropping to 4.002%, a 3.5-week low.

DXY today -0.35%, Euro/USD rises 0.5%. The yen also takes the opportunity to rise, with the USD/JPY rate at -0.57% — the Japanese government hints at possible intervention in the foreign exchange market to support the yen.

Precious metals emerge as big winners: December gold futures rise 0.77% to a one-week high, and silver rises 0.9%. Expectations of interest rate cuts + support from Federal Reserve officials for rate cuts + central banks continuously accumulating gold (China's central bank has increased its holdings for 12 consecutive months, with reserves reaching 74.09 million ounces in October) all bolster gold prices. Global central banks purchased 220 tons of gold in Q3, a month-on-month increase of 28%.

But there is also a ceiling on the good news: progress in negotiations in Ukraine has weakened the demand for safe-haven assets, and declining inflation expectations (the 10-year breakeven inflation rate has fallen to 2.112%) have suppressed gold's hedging properties. Additionally, since the record high in October, the pressure from long positions being closed has continued to suppress prices.