The dollar index (DXY00) today is down by -0.09%. The dollar today gave up an early advance and turned lower on weakness in US economic reports that showed the Nov ADP employment change rose less than expected and the Nov ISM services index fell more than expected.
The dollar today initially moved higher on weakness in the euro ahead of today’s no-confidence vote in France that could topple the government and throw the country into political turmoil. The dollar also found support from hawkish comments from St. Louis Fed President Musalem, who said the time is near for the Fed to slow or pause interest rate cuts.
The US Nov ADP employment change rose +146,000, slightly weaker than expectations of +150,000, and Oct was revised lower to +184,000 from the previously reported +233,000.
The US Nov ISM services index fell -3.9 to 52.1, weaker than expectations of 55.3.
US Oct factory orders rose +0.2% m/m, right on expectations.
St. Louis Fed President Musalem said, "The time may be approaching to consider slowing the pace of interest rate reductions, or pausing, to carefully assess the current economic environment, incoming information, and evolving outlook."
The markets are discounting the chances at 76% for a -25 bp rate cut at the December 17-18 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.21%. The euro recovered from early losses today and turned higher after weaker-than-expected US economic news weighed on the dollar and sparked short covering in the euro. The euro also found support today from an upward revision to the Eurozone Nov S&P composite PMI.
The euro today initially opened lower due to political turmoil in France as Marine Le Pen's National Rally party vowed to support a no-confidence vote today submitted by a left-wing coalition, a motion that will pass if backed by both groups. The euro was also pressured by dovish comments today from ECB Governing Council member Rehn, who said the ECB will continue to ease policy in the coming months.
The Eurozone Nov S&P composite PMI was revised upward by +0.2 to 48.3 from the previously reported 48.1.
ECB Governing Council member Rehn said inflation has slowed to the targeted 2%, and Eurozone economic growth is fragile. "These factors have added to the grounds for cutting the benchmark rate in December, and this direction in monetary policy is set to continue into the coming months."
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 9% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) today is up by +0.66%. Higher T-note yields are weighing on the yen. Also, a decline in Japanese government bond yields has weakened the yen’s interest rate differentials and is weighing on the yen after the 10-year JGB bond yield today fell to a 3-week ow of 1.045%. The yen recovered from its worst levels today after weaker-than-expected US economic news knocked the dollar down from early highs.
February gold (GCG25) today is up +6.00 (+0.22%), and March silver (SIH25) is up +0.258 (+0.82%). Precious metals today are moderately higher and are finding support from political turmoil in South Korea and France that has boosted safe-haven demand for precious metals. Gold is also seeing support from increased demand as a store of value following today’s comments from ECB Governing Council member Rehn, who said the ECB will continue to ease monetary policy in the coming months. In addition, ramped-up hostilities in the Ukraine-Russia conflict support safe-haven demand for precious metals.
Today’s dollar strength is limiting gains in metals. Also, today’s rally in the S&P 500 to a new record high has curbed some safe-haven demand for precious metals. In addition, higher T-note yields today are negative for precious metals.
