The dollar index (DXY00) today is down by -0.61%. The dollar is falling today after President-elect Trump picked Scott Bessent as the new Treasury Secretary, who is seen as a fiscal hawk and favors less government spending and more gradual tariffs. Bessent’s nomination eases concerns about Trump’s inflationary agenda, as Bessent is expected to take a more gradual approach to policy. Today’s rally in the S&P 500 to a new record also reduces liquidity demand for the dollar. The dollar extended its losses after today’s US economic news showed the Oct Chicago Fed national activity index fell more than expected to a 9-month low.
The US Oct Chicago Fed national activity index fell -0.13 to a 9-month low of -0.40, weaker than expectations of no change at -0.28.
The US Nov Dallas Fed manufacturing outlook survey rose +0.3 to -2.7, weaker than expectations of -1.8.
The markets are discounting the chances at 52% for a -25 bp rate cut at the December 17-18 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.78%. Today’s slump in the dollar has sparked some short covering in the euro. The euro extended its gains on hawkish comments from ECB Chief Economic Lane, who said elevated services inflation would require the ECB to gradually lower interest rates. His comments knocked the chances of a 50 bp rate cut by the ECB at next month’s meeting to 35% from 48% last Friday. Today’s economic news was negative for the euro after the German Nov IFO business confidence fell more than expected.
The German Nov IFO business climate fell -0.8 to 85.7, weaker than expectations of 86.0.
ECB Chief Economist Lane said the ECB "will have to gradually reduce interest rates" with services inflation still elevated.
ECB Governing Council member Kazaks said, "My conviction is that looking at what's happening at the moment in the European economy, there has to follow another interest rate cut in December."
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 35% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is down by -0.58%. Today’s weaker dollar sparked some short covering in the yen. Also, lower T-note yields today are supportive of the yen. The yen also has carryover support from last Friday when Japan’s National Oct core CPI rose more than expected at the fastest pace in 6 months, which may push the BOJ to raise interest rates at next month’s policy meeting.
The Japan Sep leading index CI was revised downward by -0.3 to 109.1 from the previously reported 109.4.
December gold (GCZ24) today is down -76.40 (-2.82%), and December silver (SIZ24) is down -1.028 (-3.28%). Precious metals today are sharply lower, with silver sliding to a 1-week low. Precious metal came under pressure today after President-elect Trump's nominated Scott Bessent for US Treasury Secretary. The nomination of Bessent eases concerns about Trump’s inflationary agenda, as Bessent is a fiscal hawk who will prioritize economic and market stability and lower deficits, which could curb demand for gold as an inflation hedge. Precious metals extended their losses today on reports that Israel and Hezbollah are close to reaching a deal on a ceasefire, which curbs safe-haven demand for precious metals. In addition, a decline in inflation expectations reduces demand for gold as an inflation hedge after the US 10-year breakeven inflation rate fell to a 2-1/2 week low today.
Precious metals have some support today from a weaker dollar and lower global bond yields. Also, dovish comments today from ECB Governing Council member Kazaks boosted demand for gold as a store of value when he said the ECB must cut interest rates next month due to a weakening economy. In addition, the escalation of the Ukraine-Russia conflict supports safe-haven demand for precious metals after Russia launched a new hypersonic ballistic missile into Ukraine.
