The dollar index (DXY00) today is up by +0.02%. The dollar today recovered from overnight losses and is slightly higher. The dollar’s interest rate differentials have strengthened today and are boosting the dollar after the 10-year T-note yield rose to a new 7-month high. Also, the weakness in stocks today has boosted some liquidity demand for the dollar. Mixed US labor market news today is limiting the upside in the dollar.
Weekly US labor market news is mixed. Weekly initial unemployment claims unexpectedly fell -1,000 to a 1-month low of 219,000, showing a stronger labor market than expectations of an increase to 223,000. However, weekly continuing unemployment claims rose +46,000 to a 3-year high of 1.910 million, above expectations of 1.881 million and a sign that it is taking longer for out-of-work people to find a job.
The markets are discounting the chances at 9% for a -25 bp rate cut at the January 28-29 FOMC meeting.
EUR/USD (^EURUSD) is down by -0.01%. The euro today is slightly lower due to a stronger dollar. The euro is also weighed down on negative carryover from Tuesday when ECB Governing Council member Vujcic said that ECB projections point to further interest rate cuts. Trading activity in the euro is below normal, with European markets closed today for the Christmas and Boxing Day holidays.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its next meeting on January 30 and at 8% for a -50 bp rate cut at that meeting.
USD/JPY (^USDJPY) today is up by +0.36% and posted a new 5-month high. The yen has been under pressure over the past several weeks as government officials downplay the odds of a near-term BOJ rate hike. Last Thursday, the BOJ kept its overnight call rate unchanged at 0.25%. Also, BOJ Governor Ueda on Wednesday avoided giving any clues about a possible interest rate hike, further pressuring the yen.
February gold (GCG25) today is up +13.40 (+0.51%), and March silver (SIH25) is up +0.157 (+0.52%). Precious metals today are moderately higher, with silver posting a 1-week high. Today’s slide in stocks has boosted safe-haven demand for precious metals. Gold also garnered support as a store of value after BOJ Governor Ueda avoided giving any clues about a possible interest rate hike on Wednesday. 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. Silver prices have support on hopes of increased industrial metals demand in China on reports that China will launch additional stimulus measures in 2025. Higher T-note yields and a stronger dollar limit the upside in precious metals today.
