The dollar index (DXY00) today is trading slightly higher on speculation the Fed will signal a pause in its rate-cutting cycle after cutting rates by -25 bp today. Higher T-note yields today are also supportive of the dollar. Today’s US housing news was mixed for the dollar, but a record Q3 current account deficit was bearish for the dollar.
US Nov housing starts unexpectedly fell -1.8% m/m to 1.289 million, weaker than expectations of an increase to 1.345 million. However, Nov building permits, a proxy for future construction, rose +6.1% m/m to a 9-month high of 1.505 million, stronger than expectations of 1.430 million.
The US Q3 current account deficit was a record -$310.9 billion, wider than expectations of -$287.1 billion.
The markets are discounting the chances at 99% for a -25 bp rate cut after today’s FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.02%. The euro today is little changed on some mixed Eurozone economic news. Eurozone Nov CPI was revised lower, and Eurozone Oct construction output posted its largest increase in 21 months. Higher European government bond yields today are supportive of the euro.
Eurozone Nov CPI was revised lower to +2.2% y/y from the previously reported +2.3% y/y. Nov core CPI remained unchanged at +2.7% y/y.
Eurozone Oct construction output rose +1.0% m/m, the largest increase in 21 months.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its next meeting on January 30 and a 12% chance for a -50 bp rate cut at that meeting.
USD/JPY (^USDJPY) today is up by +0.26%. The yen today is mildly lower after mixed Japanese trade news that showed strength in exports but unexpected weakness in imports. The yen is also under pressure from expectations that the BOJ will refrain from raising interest rates at Thursday’s policy meeting.
Japanese trade news was mixed. Japan Nov exports rose +3.8% y/y, stronger than expectations of +2.5% y/y. Japan Nov imports unexpectedly fell -3.8% y/y, weaker than expectations of +0.8% y/y and the biggest decline in 8 months.
February gold (GCG25) today is down -11.70 (-0.44%), and March silver (SIH25) is down -0.251 (-0.81%). Precious metals today are trading lower on a slightly stronger dollar. Also, higher global bond yields are negative for precious metals. In addition, speculation the Fed will signal a pause in its interest rate cutting cycle after cutting rates by -25 bp today is weighing on precious metals prices.
Precious metals have safe-haven support from geopolitical risks after the recent collapse of the Syrian government and the escalation of hostilities in the Ukraine-Russia conflict. Silver prices also found support today on global economic news that showed US Nov building permits rose more than expected to a 9-month high, and Eurozone Oct construction output posted its largest increase in 21 months, supportive factors for industrial metals demand.
