The dollar index (DXY00) today is up by +0.07%. The dollar today is slightly higher after President-elect Trump said on his first day in office he would impose an extra 10% tariff on goods from China and a 25% tariff on all products from Canada and Mexico. However, the dollar gave up most of its gains after stocks rallied, reducing liquidity demand for the dollar. US economic news was mixed for the dollar, with Nov US consumer confidence climbing to a 16-month high and Oct new home sales falling to a nearly 2-year low.
The US Sep S&P CoreLogic composite-20 home price index eased to 4.57% y/y from +5.21% y/y in Aug, weaker than expectations of +4.70% and the smallest year-on-year increase in a year.
US Oct new home sales fell -17.2% m/m to a 2-year low of 610,000, weaker than expectations of 725,000.
The Conference Board US Nov consumer confidence index rose +2.1 to a 16-month high of 111.7, close to expectations of 111.8.
The US Nov Richmond Fed manufacturing outlook survey was unchanged at -14, weaker than expectations of an increase to -11.
The markets are discounting the chances at 59% for a -25 bp rate cut at the December 17-18 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.08%. The euro today is moderately higher after US President-elect Trump vowed additional tariffs on the US’s main trading partners without mentioning the Eurozone. Gains in the euro are limited after dovish comments from ECB Vice President Guindos knocked the 10-year German bund yield down to a 5-week low, weakening the euro’s interest rate differentials.
ECB Vice President Guindos said, "If the ECB's projections are confirmed, we will continue making our monetary policy stance less restrictive."
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 26% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is down by -0.38%. The yen today added to Monday’s gain and climbed to a 2-week high against the dollar. The yen pushed higher today after Japan’s November producer prices rose more than expected, a hawkish factor for BOJ policy. The yen has carryover support from last Friday when Japan’s National Oct core CPI rose at the fastest pace in 6 months, which may push the BOJ to raise interest rates at next month’s policy meeting.
The Japan Nov PPI services prices rose +2.9% y/y, stronger than expectations of +2.5% y/y.
December gold (GCZ24) today is up +4.80 (+0.18%), and December silver (SIZ24) is up +0.191 (+0.63%). Precious metals recovered from 1-week lows today and are modestly higher. Short covering emerged today in precious metals after President-elect Trump vowed to impose an additional 10% tariff on goods from China and a 25% tariff on goods from Canada and Mexico on his first day in office, which could stoke inflation and is bullish for precious metals. Dovish ECB comments today also boosted demand for gold as a store of value after ECB Vice President Guindos said he expects the ECB to keep lowering interest rates. In addition, the escalation of the Ukraine-Russia conflict supports safe-haven demand for precious metals.
Precious metal today initially opened lower with gold and silver, posting 1-week lows amid a potential easing of tensions in the Middle East after the Israeli government said it expects to pass a cease-fire deal today with Hezbollah. Also, a stronger dollar and higher T-note yields today are bearish for precious metals. In addition, strength in stocks today has curbed safe-haven demand for precious metals.
