The dollar index (DXY00) today is down by -0.14%. The dollar is under pressure today from strength in the yuan after Chinese leaders signaled it will expand fiscal spending and ramp up “extraordinary policy adjustment” to boost the economy. Also, an unexpected decline in US Oct wholesale sales was bearish for the dollar. In addition, the dollar is also weighed down by expectations that the FOMC will cut interest rates by 25 bp at next week’s policy meeting. Higher T-note yields today are limiting losses in the dollar.
US Oct wholesale trade sales unexpectedly fell -0.1% m/m, weaker than expectations of +0.2% m/m and the first decline in four months.
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 up by +0.05%. Today’s dollar weakness has sparked some short covering in the euro. Gains in the euro are limited after the Eurozone Dec Sentix investor confidence index unexpectedly fell to a 13-month low. Also, expectations for the ECB to cut interest rates by 25 bp at Thursday’s policy meeting are bearish for the euro.
The Eurozone Dec Sentix investor confidence index unexpectedly fell -4.7 to a 13-month low of -17.5, weaker than expectations of an increase to -12.3.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for Thursday’s meeting and at 8% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is up by +0.74%. The yen is under pressure today based on comments from Japanese Prime Minister Ishiba, who said Japan has not escaped deflation yet, dampening speculation that the BOJ would hike interest rates at the December 19 policy meeting. Also, higher T-note yields today are undercutting the yen. On the supportive side of the yen was today’s stronger-than-expected Japanese economic news on Q3 GDP and the Nov eco watchers outlook survey.
The Japan Nov eco watchers outlook survey rose +1.1 to 49.4, stronger than expectations of 48.7.
Japan's Q3 GDP was revised upward to +1.2% (q/q annualized) from the previously reported +1.0%.
February gold (GCG25) today is up +37.60 (+1.41%), and March silver (SIH25) is up +1.302 (+4.12%). Precious metals today are sharply higher, with gold posting a 2-week high and silver posting a 1-month high. Today’s weaker dollar is supportive of metals. Also, heightened geopolitical risks in the Middle East have boosted safe-haven demand for precious metals amid the collapse of the Syrian government.
Gold also saw support from an increase in demand from China after the People’s Bank of China said on Saturday that it bought 160,000 ounces of gold last month, its first purchase since April. Silver prices garnered support today after China’s Politburo vowed to boost fiscal measures and stimulus to revive the economy, which supports industrial metals demand. Finally, the escalation of hostilities in the Ukraine-Russia conflict supports safe-haven demand for precious metals.
