The dollar index (DXY00) today is up by +0.27%. The dollar recovered today from a 3-1/2 week low and is moderately higher. Short covering emerged in the dollar today after the University of Michigan US Dec consumer sentiment index rose more than expected to an 8-month high. The dollar also garnered support after US Nov nonfarm payrolls and Nov average hourly earnings rose more than expected, a sign of economic strength.
The dollar today initially moved lower on the US Nov payroll report that showed the Nov unemployment rate unexpectedly increased, which boosted the chances for a Fed rate cut at the Dec 17-18 FOMC meeting to 87% from 70% before the report.
US Nov nonfarm payrolls rose +227,000, stronger than expectations of +220,000, and Oct was revised upward to +36,000 from the previously reported +12,000. The Nov unemployment rate unexpectedly rose +0.1 to 4.2%, showing a weaker labor market than expectations of no change at 4.1%.
US Nov average hourly earnings rose +0.4% m/m and +4.0% y/y, stronger than expectations of +0.3% m/m and +3.9% y/y.
The University of Michigan US Dec consumer sentiment index rose +2.2 to an 8-month high of 74.0, stronger than expectations of 73.2.
The markets are discounting the chances at 87% for a -25 bp rate cut at the December 17-18 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.22%. The euro fell from a 3-week high today and turned lower after the dollar recovered from early losses and moved higher. The euro was also under pressure after German Oct industrial production unexpectedly declined.
The euro today initially moved higher when the dollar briefly fell following the US Nov payroll report. The euro also has carryover support from Thursday when National Rally leader Le Pen said she sees no case for President Macron to quit under current conditions and that France can pass a budget for 2025 in the next few weeks.
German Oct industrial production unexpectedly fell -1.0% m/m, weaker than expectations of +1.0% m/m.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 8% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is down by -0.19%. The yen is moderately higher today due to better-than-expected Japanese economic reports on Oct household spending and Oct real cash earnings, which are hawkish for BOJ policy. The yen added to its gains today after the dollar and T-note yields tumbled on the US Nov payroll report.
The Japan Oct leading index CI fell -0.5 to 108.6, weaker than expectations of 108.8.
Japan Oct household spending fell -1.3% y/y, a smaller decline than expectations of -2.5% y/y.
Japan Oct real cash earnings were unchanged y/y, stronger than expectations of -0.1% y/y.
February gold (GCG25) today is up +10.70 (+0.40%), and March silver (SIH25) is up +0.064 (+0.20%). Precious metals recovered from early losses today and are moderately higher. Today’s US Nov payroll report boosted the chances for a Fed rate cut later this month and was bullish for precious metals. Also, a decline in global bond yields today supports precious metals. In addition, ramped-up hostilities in the Ukraine-Russia conflict support safe-haven demand for precious metals.
Gains in precious metals are limited due to strength in stocks, which reduces safe-haven demand for precious metals. Also, the dollar recovered from a 3-1/2 week low today and moved higher, a bearish factor for precious metals. In addition, today’s report showed an unexpected decline in German October industrial production, which was bearish for industrial metals demand and negative for silver prices.
