The dollar index (DXY00) today is down by -0.18%. The dollar is weaker amid expectations that the Fed will cut the federal funds target range by -25 bp at the conclusion of today’s FOMC meeting. The dollar extended its losses today after the US Q3 employment cost index rose less than expected, a dovish factor for Fed policy.
The dollar has recently been undercut by concerns that President Trump intends to appoint a dovish Fed Chair, which would be bearish for the dollar. Mr. Trump said last that he will announce his selection for the new Fed Chair in early 2026. Bloomberg reported last week that National Economic Council Director Kevin Hassett is the most likely choice as the next Fed Chair, seen by markets as the most dovish candidate.
The US Q3 employment cost index rose +0.8% q/q, slightly weaker than expectations of +0.9% q/q.
The markets are discounting a 93% chance that the FOMC will cut the fed funds target range by 25 bp at the conclusion of the Tue/Wed FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.14%. The euro is rising today amid a weaker dollar. Also, hawkish ECB comments today are supportive of the euro after ECB President Lagarde said the ECB will likely raise its economic growth forecasts at next week’s policy meeting, and ECB Governing Council member Simkus said he sees no further ECB interest rate cuts.
ECB President Lagarde said the ECB will likely raise its economic growth forecasts at next week’s policy meeting, reflecting a more optimistic outlook.
ECB Governing Council member Simkus said, “We have an inflation rate that is more or less close to the 2% target in the medium term, which suggests no need for a change in interest rates, not only at the next ECB meeting in December but also in further meetings.”
Swaps are pricing in a 0% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) today is down by -0.28%. The yen is rising today amid a weaker dollar. Also, today’s economic news showed that Japan’s producer prices remained above 2% last month, a hawkish factor for BOJ policy that is supportive of the yen. Gains in the yen accelerated today after T-note yields moved from higher to lower on the day.
The Japan Nov PPI rose +2.7% y/y, unchanged from Oct and right on expectations.
The markets are discounting an 83% chance of a BOJ rate hike at the next policy meeting on December 19.
February COMEX gold (GCG26) today is down -15.80 (-0.37%), and March COMEX silver (SIH26) is down -0.140 (-0.27%).
Gold and silver prices are moving lower today, with Mar silver falling from a contract high and nearest-futures (Z25) retreating from an all-time high of $61.44 a troy ounce. Hawkish central bank comments today weighed on precious metals prices. ECB President Lagarde said the ECB will likely raise its economic growth forecasts at next week’s policy meeting, reflecting a more optimistic outlook. Also, ECB Governing Council member Simkus said he sees no more interest rate cuts from the ECB due to stronger economic activity and inflation.
Today’s weaker dollar is a bullish factor for metals. Also, expectations that the FOMC will cut the federal funds target range by -25 bp later today are supportive of precious metals. In addition, precious metals have safe-haven demand tied to uncertainty over US tariffs and geopolitical risks in Ukraine and the Middle East.
Strong central bank demand for gold is supportive of prices, following the recent news that bullion held in China’s PBOC reserves rose by +30,000 ounces to 74.1 million troy ounces in November, the thirteenth consecutive month the PBOC has boosted its gold reserves. Also, the World Gold Council recently reported that global central banks purchased 220 MT of gold in Q3, up +28% from Q2.
Silver has support due to concerns about tight Chinese silver inventories. Silver inventories in warehouses linked to the Shanghai Futures Exchange on November 21 fell to 519,000 kilograms, the lowest level in 10 years.
Since posting record highs in mid-October, long liquidation pressures have weighed on precious metals prices, as ETF holdings have recently fallen after reaching 3-year highs on October 21. However, fund demand for silver has rebounded, as long holding in silver ETFs rose to a 3.25-year high last Friday.
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. This article was originally published on Barchart.com
