The dollar index (DXY00) Tuesday fell by -0.11% as it gave back some of Monday’s gains. Monday’s dovish comments from Fed Governor Waller that he supports a rate cut at the December 17-18 FOMC meeting boosted the chances for a Fed rate cut to 74% from 55% Monday, undercutting the dollar. Also, strength in the yen is undercutting the dollar as a jump in the 10-year JGB bond yield Tuesday to a 1-week high boosted the yen. The dollar recovered from its worst levels after T-note yields rose when the US Oct JOLTS job openings rose more than expected, a sign of strength in the labor market that is hawkish for Fed policy.
US Oct JOLTS job openings rose +372,000 to 7.744 million, showing a stronger labor market than expectations of 7.519 million.
Fed Governor Kugler said, "The labor market remains solid, and inflation appears to be on a sustainable path to our 2% goal, even if there have been some bumps along the way."
San Francisco Fed President Daly said a December interest rate cut by the Fed is still on the table, and even with another cut, monetary policy will remain restrictive.
The markets are discounting the chances at 74% for a -25 bp rate cut at the December 17-18 FOMC meeting.
EUR/USD (^EURUSD) Tuesday rose by +0.11%. Weakness in the dollar Tuesday sparked some mild short covering in the euro. The euro continues to be undercut by political turmoil in France. Marine Le Pen's National Rally party is expected to join forces with a left-wing coalition in a no-confidence vote on Wednesday to topple Prime Minister Barnier's administration.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 14% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) Tuesday fell by -0.11%. The yen today added to Monday’s gains and posted a 7-week high against the dollar. The yen has carryover support from Monday on hawkish comments from BOJ Governor Ueda, who said the next rate hike by the BOJ is “nearing,” suggesting the BOJ may raise rates at this month’s policy meeting. Also, higher Japanese government bond yields have strengthened the yen’s interest rate differentials and boosted the yen after the 10-year JGB bond yield rose to a 1-week high Tuesday at 1.094%. The yen fell back from its best levels Tuesday after T-note yields climbed, a bearish factor for the yen.
February gold (GCG25) Tuesday closed up +9.40 (+0.35%), and March silver (SIH25) closed up +0.628 (+2.03%). Precious metals Tuesday settled moderately higher, with silver posting a 1-week high. The dollar’s weakness Tuesday was bullish for metals prices. Gold also has increased demand as a store of value following Monday’s comments from Fed Governor Waller, who said he favors a Fed rate cut at the December 17-18 FOMC meeting. In addition, ramped-up hostilities in the Ukraine-Russia conflict support safe-haven demand for precious metals. Silver prices have carryover support from Tuesday’s rally in copper prices to a 1-1/2 week high.
Precious metals fell back from their best levels Tuesday as T-note yields rose after US economic news showed Oct JOLTS job openings rose more than expected, a hawkish factor for Fed policy.
