The dollar index (DXY00) on Monday fell by -0.03%. The dollar posted modest losses on Monday and came under pressure on dovish comments from Fed Governor Christopher Waller, who said he’s advocating a December rate cut by the Fed. Mr. Waller’s comments pushed the chance of a Fed rate cut next month to 80% from 30% last Thursday. Also, Monday’s stock rally reduced liquidity demand for the dollar. Weakness in the yen was supportive for the dollar today, as the yen attempts to hold above last Friday’s 10-month low.
Fed Governor Christopher Waller said he’s advocating for a December rate cut by the Fed due to concerns about the labor market and then taking a meeting-by-meeting approach starting in January.
The markets are discounting an 80% 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) on Monday rose by +0.12%. The euro moved higher on Monday due to dollar weakness. Also, improved prospects for an end to the war in Ukraine boosted the euro after NATO Secretary General Rutte said he’s sure a peace deal to end the war in Ukraine will get done, as Russia is “not in good place” after failing to make significant progress on the battlefield and losing 20,000 troops a month. Limiting gains in the euro was the unexpected decline in the German Nov IFO business confidence.
The German Nov IFO business climate unexpectedly fell -0.4 to 88.1, weaker than expectations of an increase to 88.5.
Swaps are pricing in a 2% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) on Monday rose by +0.26%. The yen was under pressure on Monday on concerns about Japan’s debt burden. The yen is just above last Friday’s 10-month low against the dollar after the Japanese government last Friday approved a 17.7 trillion-yen ($112 billion) stimulus package, higher than the 13.9 trillion-yen package released last year by former Prime Minister Ishiba. The yen recovered from its worst level on Monday after T-note yields declined. Trading activity in the yen was below normal as Japanese markets were closed on Monday for the Labor Thanksgiving Day holiday.
The markets are discounting a 16% chance of a BOJ rate hike at the next policy meeting on December 19.
December COMEX gold (GCZ25) on Monday closed up +14.70 (+0.36%), and December COMEX silver (SIZ25) closed up +0.413 (+0.83%).
Gold and silver prices recovered from early losses and moved higher on Monday after Fed Governor Christopher Waller’s dovish comments boosted demand for precious metals as a store of value. Mr. Waller said he’s advocating a December rate cut by the Fed, which pushed the chances for a Fed rate cut at next month’s FOMC meeting up to 80% from 30% last Thursday. 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.
Precious metals initially moved lower today as a rally in stocks curbed their safe-haven appeal. Also, improving prospects for an end to the war in Ukraine are curbing safe-haven demand for precious metals.
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.
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