The dollar index (DXY00) today is down by -0.29%. The dollar is sliding today on speculation that weak US labor market news this week, including the August JOLTS job openings, the September ADP employment change, and the September nonfarm payrolls, will prompt the Fed to continue cutting interest rates. Also, the looming risk of a US government shutdown on Wednesday is weighing on market sentiment toward the dollar. The dollar recovered from its worst level after Aug pending home sales rose more than expected by the most in 5 months.
US Aug pending home sales rose +4.0% m/m, stronger than expectations of +0.4% m/m and the biggest increase in 5 months.
The US Sep Dallas Fed manufacturing activity survey unexpectedly fell -6.9 to -8.7, weaker than expectations of an increase to -1.0.
Comments today from Cleveland Fed President Beth Hammack were hawkish and supportive of the dollar, as she stated that inflation "is not really getting back down to the Fed's objective of 2% until the end of 2027 or early 2028" and that "we really need to maintain a restrictive stance for policy."
The markets are pricing in an 89% chance of a -25 bp rate cut at the next FOMC meeting on Oct 28-29.
EUR/USD (^EURUSD) today is up by +0.29%. The euro is moving higher today due to weakness in the dollar. Also, today's economic news was supportive of the euro after the Eurozone's Sep economic confidence index rose more than expected. In addition, hawkish comments today from ECB Governing Council member Makhlouf were bullish for the euro, as he stated that the ECB is "near the bottom" of its rate-cutting cycle.
The euro also has support from central bank divergence, as the markets view the ECB as largely finished with its rate-cut cycle, while the Fed is expected to cut rates by roughly two more times by the end of this year.
Eurozone Sep economic confidence unexpectedly rose +0.2 to 95.5, stronger than expectations of 95.3.
ECB Governing Council member Makhlouf said the ECB is "near the bottom" of its rate-cutting cycle and policymakers need to remain vigilant because the full impact of US tariffs "is still to feed through" to European Union imports.
Swaps are pricing in a 2% chance of a -25 bp rate cut by the ECB at the October 30 policy meeting.
USD/JPY (^USDJPY) today is down by -0.62%. Today's weaker dollar is supportive of the yen. Also, today's upward revision to the Japan Jul leading index CI to a 4-month high is bullish for the yen. In addition, hawkish comments from BOJ board member and noted dove Noguchi pushed the yen higher when he noted the need for a BOJ interest rate hike.
The Japan Jul leading index CI was revised upward to a 4-month high of 106.1 from the previously reported 105.9.
BOJ board member and noted dove Noguchi said, "Various economic indicators for Japan show steady progress in achieving the 2% price stability target. This suggests that the need to adjust the policy interest rate is increasing more than ever."
December gold (GCZ25) today is up +50.10 (+1.32%), and December silver (SIZ25) is up +0.329 (+0.71%). Precious metal prices are climbing today, with Dec gold posting a contract high and nearest future (V25) posting a record high of $3,825.60 a troy ounce. Also, Dec silver posted a contract high, and nearest-futures (U25) posted a 14-year high.
Precious metals are rallying today due to a weaker dollar and lower global bond yields. Precious metals continue to receive safe-haven support due to uncertainty tied to US tariffs, a possible US government shutdown this week, and the outlook for the Fed to cut interest rates by another 50 bp this year. Also, President Trump's attacks on Fed independence are boosting demand for gold, as he attempts to fire Fed Governor Cook. Additionally, Stephen Miran's intention to be a Fed Governor while still technically holding his White House job on the Council of Economic Advisors contributes to this uncertainty. Finally, geopolitical risks and global trade tensions have boosted safe-haven demand for precious metals.
Today's hawkish comments from Cleveland Fed President Beth Hammack were bearish for precious metals when she said she favored "mildly restrictive" Fed policy, citing concern that inflation could stay above the Fed's 2% target until 2028. Also, today's rally in stocks has curbed some safe-haven demand for precious metals.
Precious metals prices continue to receive support from fund buying of precious metal ETFs. Gold holdings in ETFs rose to a nearly 3-year high last Friday, and silver holdings in ETFs rose to a 3-year high last Wednesday.
