The dollar index (DXY00) Monday rose by +0.20%. The dollar on Monday recovered from a 1-1/2 month low and posted moderate gains. Strength in T-note yields on Monday was bullish for the dollar. Also, hawkish comments from Fed Vice Chair Brainard helped the dollar recover early losses when she said the U.S. economy is performing exceptionally well. The dollar on Monday initially opened lower on ideas that the Fed’s rate-hike regime is over and that the Fed may be cutting interest rates by mid-2024.
Monday’s comments from Fed Vice Chair Brainard supported the dollar when she said the economy is performing exceptionally and is coming to the point of sustainable growth and that most forecasters are taking recession calls off the table.
The markets are discounting a 10% chance for a +25 bp rate hike at the next FOMC meeting on Dec 12-13 FOMC and an 18% chance for that +25 bp rate hike at the following FOMC meeting on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates by mid-2024 in response to an expected slowdown in the U.S. economy.
EUR/USD (^EURUSD) on Monday fell by -0.08%. The euro on Monday fell back from a 1-3/4 month high and posted modest losses. A recovery in the dollar Monday from a 1-1/2 month low to higher on the day sparked long liquidation in the euro. EUR/USD on Monday initially moved higher on stronger-than-expected Eurozone economic news that showed the Nov Sentix investor confidence index unexpectedly rose to a 5-month high and after German Sep factory orders unexpectedly increased.
The Eurozone Nov Sentix investor confidence index unexpectedly rose +3.3 to a 5-month high of -18.6, stronger than expectations of a decline to -22.2.
German Sep factory orders unexpectedly rose +0.2% m/m, stronger than expectations of a decline of -1.5% m/m.
USD/JPY (^USDJPY) on Monday rose by +0.40%. Higher T-note yields on Monday weighed on the yen. Also, a rally in the Nikkei Stock Index Monday to a 1-1/2 month high reduced the safe-haven demand for the yen. In addition, the yen fell on dovish comments from BOJ Governor Ueda, who said negative interest rates would continue in Japan through year-end.
The Japan Oct Jibun Bank services PMI was revised upward by +0.5 to 51.6 from the previously reported 51.1.
BOJ Governor Ueda said it’s “unlikely” the BOJ will have the data needed to end negative interest rates by year-end.
December gold (GCZ3) Monday closed down -10.60 (-0.53%), and Dec silver (SIZ23) closed down -0.051 (-0.22%). Precious metals prices on Monday posted moderate losses. Higher global bond yields Monday undercut precious metals prices. Also, the lack of escalation of the Israeli-Hamas war has reduced geopolitical concerns in the Middle East and safe-haven demand for precious metals. A recovery in the dollar index Monday to higher from a 1-1/2 month low was another bearish factor for metals. Silver found support in Monday’s economic news that showed German Sep factory orders unexpectedly increased, a sign of strength in industrial metals demand.
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.
