The dollar index (DXY00) today is up by +0.90%. The dollar is garnering support today from weakness in the euro due to political turmoil in France after France’s far-right National Rally party said it will back a no-confidence vote against Prime Minister Barnier’s government due to a stand-off over France’s budget. Higher T-note yields today are also supportive of the dollar. The dollar extended its gains after today’s US economic news on Oct construction spending and Nov ISM manufacturing rose more than expected.
The US Nov ISM manufacturing index rose +1.9 to a 5-month high of 48.4, stronger than expectations of 47.5.
US Oct construction spending rose +0.4% m/m, stronger than expectations of +0.2% m/m.
The markets are discounting the chances at 62% for a -25 bp rate cut at the December 17-18 FOMC meeting.
EUR/USD (^EURUSD) today is down by -1.00%. Political turmoil in France is weighing on the euro after Far-Right leader Le Pen said her National Rally party will back a no-confidence motion against Prime Minster Barnier’s government after he failed to agree to all of the National Rally party’s demands on next year’s budget. Also, dovish comments from ECB Governing Council member Kazaks undercut the euro when he said the ECB is debating a larger 50 bp cut in interest rates next week.
The German Nov S&P manufacturing PMI was revised downward by -0.2 to 43.0 from the previously reported 43.2.
ECB Governing Council member Kazaks said the ECB will likely cut interest rates when it meets next week and that a bigger move is currently up for debate.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 18% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is up by +0.11%. Broad strength in the dollar today is weighing on the yen. Also, higher T-note yields today are bearish for the yen. Losses in the yen are limited due to stronger-than-expected Japanese economic news on Q3 capital spending. Also, hawkish comments from BOJ Governor Ueda boosted the yen when he said the next rate hike by the BOJ is “nearing.”
Japan's Q3 capital spending rose +8.1% y/y, stronger than expectations of +6.7% y/y. Q3 capital spending ex-software rose +9.5% y/y, stronger than expectations of +8.2% y/y.
BOJ Governor Ueda said interest rate hikes from the BOJ are "nearing" as economic trends develop in line with the BOJ's forecasts.
December gold (GCZ24) today is down -12.10 (-0.46%), and December silver (SIZ24) is down -0.185 (-0.60%). Precious metals today are moderately lower. Today’s dollar strength is weighing on metals prices. Also, higher T-note yields today are bearish for precious metals. In addition, hawkish comments from BOJ Governor Ueda were bearish for gold when he said a rate hike by the BOJ is “nearing.” Silver prices also have some negative carryover from today’s slide in copper prices to a 2-week low.
Losses in precious metals were limited due to dovish comments from ECB Governing Council member Kazaks, who said the ECB is debating a larger 50 bp rate cut for next week’s ECB meeting. Also, ramped-up hostilities in the Ukraine-Russia conflict support safe-haven demand for precious metals. Silver prices garnered support from today’s economic news that showed the US Nov ISM manufacturing index and China’s Nov manufacturing PMI rose more than expected, which is a bullish factor for industrial metals demand.
