The dollar index (DXY00) on Wednesday fell by -0.24%. The dollar was under pressure Wednesday after the monthly ADP employment report rose less than expected, which knocked T-note yields lower and undercut the dollar. Also, a rebound in stocks on Wednesday curbed the liquidity demand for the dollar. Better-than-expected economic news on U.S. Aug factory orders and the Sep ISM services index limited losses in the dollar.
Wednesday’s U.S. economic news was mixed for the dollar. On the negative side, the Sep ADP employment change rose +89,000, weaker than expectations of +150,000 and the smallest increase in over 2-1/2 years. Conversely, the Sep ISM services index fell -0.9 to 53.6, stronger than expectations of 53.5. Also, Aug factory orders rose +1.2% m/m, stronger than expectations of +0.3% m/m.
EUR/USD (^EURUSD) on Wednesday rose by +0.44%. The euro on Wednesday found support on a weaker dollar. Also, on Wednesday, the hawkish comments from ECB President Lagarde gave EUR/USD a boost when she said the ECB will keep interest rates restrictive “for as long as necessary.”
Wednesday’s Eurozone economic news was mixed for the euro. On the positive side, the Eurozone Sep S&P composite PMI was revised upward by +0.1 to 47.2 from the initially reported 47.1. Conversely, Aug retail sales fell -1.2% m/m, weaker than expectations of -0.5% m/m and the biggest decline in 8 months. Also, Aug PPI fell a record -11.5% y/y from a -7.6% y/y decline in July, a dovish factor for ECB policy.
ECB President Lagarde said future ECB decisions "will ensure that the interest rates will be set at sufficiently restrictive levels for as long as necessary."
USD/JPY (^USDJPY) on Wednesday rose by +0.02%. The yen on Wednesday posted modest losses but remained above Tuesday’s 11-1/2 month low against the dollar. Concerns that Japanese authorities may be close to intervening in the forex market to support the yen sparked some short covering in the yen. On Tuesday, the yen rallied to a 1-1/2 week high against the dollar on reports that Japanese authorities were checking forex rates, usually a precursor to currency intervention. The yen also garnered support from higher Japanese government bond yields after the 10-year JGB bond yield on Wednesday rose to a 10-year high of 0.810%. In addition, lower T-note yields on Wednesday supported the yen.
Wednesday’s Japanese economic news was bullish for the yen after the Sep Jibun Bank services PMI was revised upward by +0.5 to 53.8 from the initially reported 53.3.
December gold (GCZ3) on Wednesday closed -6.70 (-0.36%), and Dec silver (SIZ23) closed -0.231 (-1.08%). Precious metals prices on Wednesday extended this week’s losses, with silver dropping to a 6-1/2 month low. Strength in stocks Wednesday reduced safe-haven demand for precious metals. Also, hawkish comments from ECB President Lagarde undercut gold Wednesday when she said the ECB will keep interest rates restrictive “for as long as necessary.” In addition, long liquidation pressures are weighing on gold after long gold holdings in ETFs fell to a 3-1/2 year low on Tuesday. A weaker dollar Wednesday limited losses in precious metals along with a decline in T-note yields.
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.
