The dollar index (DXY00) today is slightly higher due to stronger-than-expected US weekly jobless claims and Q2 GDP reports, hawkish factors for Fed policy that pushed T-note yields higher. Gains in the dollar are limited by strength in the Chinese yuan, which climbed to a 16-month high against the dollar after the government boosted stimulus measures. Also, today’s sharp rally in stocks has curbed liquidity demand for the dollar.
US weekly initial unemployment claims unexpectedly fell -4,000 to a 4-month low of 218,000, showing a stronger labor market than expectations of an increase to 223,000.
US Q2 GDP was left unrevised at +3.0% (q/q annualized), stronger than expectations of a downward revision to +2.9%.
US Aug capital goods new orders nondefense ex-aircraft and parts rose +0.1% m/m, right on expectations.
US Aug pending home sales rose +0.6% m/m, weaker than expectations of +1.0% m/m.
The markets are discounting the chances at 100% for a -25 bp rate cut at the November 6-7 FOMC meeting and a 51% chance for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up by +0.08%. The euro today is slightly higher due to an unexpected increase in the German Oct GfK consumer confidence index. Gains in the euro are limited after the Eurozone Aug M3 money supply rose more than expected at the fastest pace in 19 months.
Eurozone Aug M3 money supply rose +2.9% y/y, stronger than expectations of +2.5% y/y and the largest increase in 19 months.
The German Oct GfK consumer confidence index unexpectedly rose +0.7 to -21.2, stronger than expectations of a decline to -22.5.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 63% for the October 17 meeting and 100% for that -25 bp rate cut at the December 12 meeting.
USD/JPY (^USDJPY) today is up by +0.01%. The yen today fell to a 3-week low against the dollar based on expectations that Sanae Takaichi would be elected Liberal Democratic Party leader on Friday. Takaichi, who is likely to become Japan's next prime minister, said earlier this week that "it's stupid to raise interest rates now." Today’s sharp +2% rally in the Nikkei Stock Index to a 3-week high has also reduced safe-haven demand for the yen. Losses in the yen are limited due to the hawkish minutes of the BOJ’s July 30-31 policy meeting.
According to the minutes of the July 30-31 BOJ meeting, a BOJ policymaker said it would be necessary for the BOJ to proceed with further adjustment of easing if it was confirmed that inflation is developing in line with BOJ expectations.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 2% for the October 30-31 meeting and a +19% chance for that +10 bp rate hike at the December 18-19 meeting.
December gold (GCZ24) today is up +4.60 (+0.17%), and December silver (SIZ24) is up +0.392 (+1.22%). Precious metals today are mildly higher, with Dec gold posting a new contract high and nearest-futures (V24) gold posting a new record high of $2,683.90 an ounce. Nearest-futures silver (U24) soared to an 11-year high. Weakness in the dollar today is bullish for metals prices. Precious metals are also climbing today after China’s action to increase stimulus measures boosted demand for gold as a store of value. In addition, fund buying of gold has supported gold prices as long gold positions in ETFs rose to a 7-1/2 month high Wednesday. Silver prices soared today after China increased stimulus measures, which may boost economic growth and demand for industrial metals.
Precious metals fell back from their best levels today after the dollar index recovered from early losses and moved higher. Also, higher T-note yields today are bearish for precious metals. In addition, today’s rally in the S&P 500 to a new record high has reduced safe-haven demand for precious metals.
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.
