The dollar index (DXY00) on Tuesday rose by +0.70%. The dollar on Tuesday recovered from a 1-month low and posted moderate gains after stronger-than-expected U.S. manufacturing news pushed T-note yields higher. Also, weakness in EUR/USD supported the dollar on dovish comments from ECB President Lagarde and weaker-than-expected Eurozone economic news.
Tuesday’s U.S. economic news supported the dollar after the Oct S&P U.S. manufacturing PMI unexpectedly rose +0.2 to a 6-month high of 50.0, stronger than expectations of a decline to 49.5.
EUR/USD (^EURUSD) on Tuesday fell by -0.75%. The euro Tuesday fell from a 1-month high and turned lower on weaker-than-expected news on Eurozone Oct manufacturing and services activity. The euro extended its losses on comments from ECB President Lagarde, who said the Eurozone economy faces stagnation for the next few quarters.
The Oct S&P Eurozone manufacturing PMI unexpectedly fell -0.4 to 43.0, weaker than expectations of an increase to 43.7. Also, the Oct S&P Eurozone composite PMI unexpectedly fell -0.7 to 46.5, weaker than expectations of an increase to a 3-year low of 47.4.
German Nov GfK consumer confidence fell -1.4 to a 7-month low of -28.1, weaker than expectations of -27.0.
Bloomberg reported that ECB President Lagarde told the presidents of the European Commission, the European Council, and the Eurogroup that the Eurozone economy faces stagnation for the next few quarters and downside dangers, although inflation risks have become more balanced.
USD/JPY (^USDJPY) on Tuesday rose by +0.12%. The yen on Tuesday gave up an early advance and turned lower as T-note yields rose on better-than-expected U.S. manufacturing news. The yen also came under pressure as Japanese government bond yields declined after the BOJ announced an unexpected bond-buying operation.
The Japan Oct Jibun Bank manufacturing PMI was unchanged at 48.5. The Oct Jibun Bank services PMI fell -2.7 to 51.1, the slowest pace of expansion in 10 months.
The BOJ Tuesday announced an unexpected bond-buying operation in an attempt to slow the increase in long-term bond yields. The BOJ bought 300 billion yen ($2 billion) of 5-to-10-year Japanese government bonds and 100 billion yen of 10-to-25-year securities.
December gold (GCZ3) on Tuesday closed -1.70 (-0.09%), and Dec silver (SIZ23) closed -0.094 (-0.41%). Precious metals prices on Tuesday closed slightly lower. A stronger dollar Tuesday weighed on precious metals prices. Also, better-than-expected U.S. manufacturing news Tuesday was hawkish for Fed policy and pushed T-note yields higher, undercutting precious metals. In addition, geopolitical risks in the Middle East eased slightly and curbed safe-haven demand for precious metals as Israel was delaying a ground invasion of Gaza to obtain the release of more hostages. A bearish factor for silver prices was ECB President Lagarde’s comment that the Eurozone economy faces stagnation for the next few quarters, which was negative for industrial metals demand.
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.
