The dollar index (DXY00) today is up by +0.18%. The dollar today recovered from early losses and moved mildly higher as T-note yields jumped on the stronger-than-expected US Nov JOLTS job openings and Dec ISM services reports, which were hawkish for Fed policy and dampen the chances of additional Fed rate cuts in the near term.
The dollar today initially moved lower on negative carryover from Monday when the Washington Post reported that President-elect Trump's aides are weighing a tariff program covering only critical imports. If implemented, such a plan would disrupt global trade less than expected and reduce the inflationary impact of the tariffs, a dovish factor for Fed policy. Also, the US trade deficit widened in November, a negative factor for Q4 GDP and a bearish factor for the dollar.
The US Nov trade deficit widened to -$78.2 billion from -$73.6 billion in Oct, a smaller deficit than expectations of -$78.3 billion.
US Nov JOLTS job openings unexpectedly rose +259,000 to a 6-month high of 8.098 million, stronger than expectations of a decline to 7.740 million.
The US Dec ISM services index rose +2.0 to 54.1, stronger than expectations of 53.5.
The markets are discounting the chances at 7% for a -25 bp rate cut at the January 28-29 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.09%. The euro gave up overnight gains and turned lower as the dollar strengthened on better-than-expected US economic news. The euro today initially moved higher as Eurozone inflation news was slightly hawkish for ECB policy and supportive for the euro after Dec CPI rose as expected and the ECB's Nov 1-year and 3-year inflation expectations increased.
Eurozone Dec CPI rose +2.4% y/y, up from +2.2% y/y in Nov and right on expectations. Also, Dec core CPI rose +2.7% y/y, unchanged from Nov and right on expectations.
The ECB's Nov 1-year inflation expectations rate rose to 2.6% from 2.5% in Oct. The ECB's Nov 3-year inflation expectations rate rose to 2.4% from 2.1% in Oct.
Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at its next meeting on January 30.
USD/JPY (^USDJPY) today is up by +0.34%. The yen today gave up an early advance and tumbled to a 5-1/2 month low against the dollar. Higher T-note yields and dollar strength today are weighing on the yen. Also, today's +1.97% rally in the Nikkei Stock Index reduced safe-haven demand for the yen.
The yen today initially moved higher based on comments from Japanese Finance Minister Kato, who said he is "deeply concerned" about recent moves in the forex market and that "we will take appropriate action if there are excessive movements in the currency market." Japanese officials are worried about weakness in the yen and continue to threaten to intervene in support of the yen.
February gold (GCG25) today is up +14.00 (+0.53%), and March silver (SIH25) is up +0.117 (+0.38%). Precious metals today are moderately higher, with silver posting a 2-1/2 week high. Gold garnered support today from increased demand from China after the PBOC expanded its gold reserves for a second month, boosting its gold holdings to 73.29 troy million ounces in December from 72.96 million troy ounces in November. Silver has carryover support from Monday after the Washington Post reported that President-elect Trump's aides are weighing a plan for tariffs on only critical imports. If implemented, such a plan would disrupt global trade and economic growth less than expected, a supportive factor for industrial metals demand. Precious metals have continued safe-haven support from geopolitical risks after the recent collapse of the Syrian government and the escalation of hostilities in the Ukraine-Russia conflict.
Precious metals fell back from their best levels today after stronger-than-expected US economic news pushed the dollar higher and reduced the chances of additional Fed interest rate cuts. Also, higher global bond yields today are bearish for precious metals.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. More news from Barchart- Is Consolidation in Silver Bullish?
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