The dollar index (DXY00) today is down by -0.13%. The dollar is under pressure today as signs of weakness in the US labor market have bolstered the outlook for the Fed to keep cutting interest rates after ADP reported employers cut jobs this month. Losses in the dollar are limited by today’s news that the Nov NAHB housing market index unexpectedly rose to a 7-month high. Also, today’s slide in stocks has boosted some liquidity demand for the dollar.
US weekly initial unemployment claims were 232,000 for the week ended October 18. Weekly continuing claims rose +10,000 to a 2-month high of 1.957 million.
ADP reported that US employers shed an average of 2,500 jobs per week in the four weeks ended November 1.
The US Nov NAHB housing market index unexpectedly rose +1 to a 7-month high of 38, stronger than expectations of no change at 37.
US Aug factory orders rose +1.4% m/m, right on expectations.
The markets are discounting a 49% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) recovered from overnight losses and is up by +0.09%. Signs of weakness in the US labor market are weighing on the dollar to the benefit of the euro after ADP reported US employers cut jobs this month.
Central bank divergence is also supportive of the euro, with the ECB seen as largely finished with its rate-cut cycle, while the Fed is expected to cut rates several more times by the end of 2026.
Swaps are pricing in a 4% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) today is down by -0.10%. The yen today recovered from a new 9.5-month low against the dollar and turned higher after falling T-note yields sparked short covering in the yen. Today’s sharp -3% slump in the Nikkei Stock index also boosted some safe-haven demand for the yen. In addition, higher Japanese government bond yields were supportive of the yen after the 10-year JGB yield rose to a 17-year high of 1.761% today.
The yen initially moved lower today on dovish comments from BOJ Governor Ueda, who said the BOJ was gradually adjusting monetary easing. The yen also had a negative carryover from Monday when Japan’s weak Q3 GDP report sparked concern that Japan’s weak economy would bolster Prime Minister Takaichi’s case for an ambitious stimulus package that would substantially increase Japan’s debt burden.
BOJ Governor Ueda said the BOJ is in the process of slowly dialing back its easing support for the economy, saying, “We are in the process of making gradual adjustments to the degree of monetary easing.”
The markets are discounting a 28% chance of a BOJ rate hike at the next policy meeting on December 19.
December COMEX gold (GCZ25) today is down -16.60 (-0.41%), and December COMEX silver (SIZ25) is down -0.481 (-0.95%).
Gold and silver prices today fell to 1-week lows on reduced expectations for another rate cut at December’s FOMC meeting after the recent slew of hawkish Fed comments. The chances of a Fed rate cut at next month’s FOMC meeting fell to 48% today from 70% earlier this month. However, losses in precious metals are limited after today’s weekly ADP report showed employers shed jobs this month, which weighed on the dollar, pushing the chance for a Fed rate cut next month up to 48% from 40% on Monday.
Precious metals continue to have some underlying safe-haven demand amid uncertainty over US tariffs, geopolitical risks, central bank buying, and political pressure on the Fed’s independence.
Strong central bank demand for gold is supportive of prices, following the most recent news that showed bullion held in China’s PBOC reserves rose to 74.09 million troy ounces in October, the twelfth consecutive month the PBOC has boosted its gold reserves. Also, the World Gold Council recently reported that global central banks purchased 220 MT of gold in Q3, up 28% from Q2.
Since posting record highs in mid-October, long liquidation pressures have weighed on precious metals prices. Holdings in gold and silver ETFs have recently fallen after posting 3-year highs on October 21.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.