The dollar index (DXY00) today is up by +0.52%. The dollar is climbing today after CNN reported that President-elect Trump is considering declaring a national emergency to push through his tariff plans, which could roil global trade and boost price pressures. The dollar extended its gains after the 10-year T-note yield jumped to an 8-1/2 month high, strengthening the dollar’s interest rate differentials.
Today’s US labor market news was mixed for the dollar as the Dec ADP employment change rose less than expected but weekly jobless claims unexpectedly fell to a 10-1/2 month low. Dovish comments today from Fed Governor Waller limited gains in the dollar when he said he believes more Fed interest rate cuts will be appropriate.
The US Dec ADP employment change rose +122,000, weaker than expectations of +140,000.
US weekly initial unemployment claims unexpectedly fell -10,000 to a 10-1/2 month low of 201,000, showing a stronger labor market than expectations of an increase to 215,000.
Fed Governor Waller said, "The extent of further easing will depend on what the data tell us about progress toward 2% inflation, but my bottom-line message is that I believe more cuts will be appropriate."
The markets are discounting the chances at 5% for a -25 bp rate cut at the January 28-29 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.35%. Strength in the dollar today is weighing on the euro. Also, today’s report showing Eurozone Dec economic confidence fell to a 15-month low is bearish for the euro. In addition, weaker-than-expected economic news from Germany, Europe’s largest economy, are pressuring the euro after German Nov factory orders and Nov retail sales fell more than expected.
Eurozone Dec economic confidence fell -1.9 to a 15-month low of 93.7, weaker than expectations of 95.6.
Eurozone Nov PPI rose +1.6% m/m and fell -1.2% y/y, stronger than expectations of +1.5% m/m and -1.4% y/y.
German Nov factory orders fell -5.4% m/m, weaker than expectations of -0.2% m/m.
German Nov retail sales unexpectedly fell -0.6% m/m, weaker than expectations of a +0.5% m/m increase.
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 +0.18%. The yen today added to this week’s losses and fell to a 5-1/2 month low against the dollar. Higher T-note yields, and dollar strength today are pressuring the yen. Also, today’s Japanese economic news undercut the yen after Dec consumer confidence unexpectedly declined and the BOJ’s quarterly report showed supply in Japan's economy exceeded demand for an 18th straight quarter, signaling weak price pressures that are dovish for BOJ policy.
The Japan Dec consumer confidence index unexpectedly fell -0.2 to 36.2, weaker than expectations of an increase to 36.6.
Japan's Q3 output gap was revised upward to -0.53% from -0.58%. The BOJ quarterly data shows supply in Japan's economy exceeded demand for an 18th straight quarter in Q3, a sign that inflationary pressures in the economy continue to lack strength.
February gold (GCG25) today is up +14.80 (+0.56%), and March silver (SIH25) is up +0.204 (+0.66%). Precious metals today are moderately higher on increased safe-haven demand amid fears President-elect Trumps tariff policies could ignite a global trade war. CNN reported today that Mr. Trump is considering declaring a national economic emergency to push through his tariff plans. Dovish Fed comments today also boosted demand for gold as a store of value after Fed Governor Waller said he believes more Fed interest cuts will be appropriate. Gold also has carryover support from Tuesday on 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. 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.
Dollar strength today is limiting gains in precious metals. Also, higher global bond yields today are bearish for precious metals. Gains in silver are limited after German Nov factory orders fell more than expected, a negative factor for industrial metals demand.
