The dollar index (DXY00) today is up by +0.39% at a 1.5-week high. The dollar is moving higher today amid weakness in the yen, which tumbled to a 9.75-month low on concern that the Japanese government will support a stimulus package that would substantially increase Japan's debt burden. Today's US trade news was also supportive of the dollar after the Aug trade deficit narrowed more than expected.
US MBA mortgage applications fell -5.2% in the week ended November 14, with the purchase mortgage sub-index down -2.3% and the refinancing sub-index down -7.3%. The average 30-year fixed rate mortgage rose +3 bp to 6.37% from 6.34% in the prior week.
The US Aug trade deficit shrank to -$59.6 billion from -$78.2 billion in July, narrower than expectations of -$60.4 billion.
The markets are discounting a 47% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) today is down by -0.23% at a 1-week low. Today's strength in the dollar is weighing on the euro. Losses in the euro are limited after a report from Axios said the Trump administration has been secretly working with Russia to draft a new plan to end the war in Ukraine.
Central bank divergence is also supportive of the euro, with the ECB seen as largely finished with its rate-cut cycle, while the Fed is expected to cut rates several more times by the end of 2026.
Swaps are pricing in a 4% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) today is up by +0.68%. The yen tumbled to a 9.75-month low against the dollar today on dovish comments from Goushi Kataoka, a panelist advising Japanese Prime Minister Takaichi, which weighed on the yen when he said the BOJ is unlikely to raise interest rates again before March. Losses in the yen accelerated amid concerns about the Japanese debt burden when Mr. Kataoka said a supplementary budget of around 20 trillion yen ($129 billion) will be necessary this fiscal year to boost domestic demand, far larger than the 13.9 trillion yen package compiled a year ago.
Today's Japanese economic news was supportive for the yen after Sep core machine orders posted their biggest increase in 6 months. Also, higher Japanese government bond yields are supportive of the yen after the 10-year JGB yield rose to a 17-year high of 1.781% today.
Japan Sep core machine orders rose +4.2% m/m, stronger than expectations of +2.0% m/m and the biggest increase in 6 months.
The markets are discounting a 15% chance of a BOJ rate hike at the next policy meeting on December 19.
December COMEX gold (GCZ25) today is up +63.10 (+1.55%), and December COMEX silver (SIZ25) is up +1.529 (+3.03%).
Gold and silver prices are sharply higher today, recovering some of the heavy losses from the past week. Comments today from Goushi Kataoka, a panelist advising Japanese Prime Minister Takaichi, boosted demand for gold as a store of value when he said the BOJ is unlikely to raise interest rates again before March. Precious metals continue to have some underlying safe-haven demand amid uncertainty over US tariffs, geopolitical risks, central bank buying, and political pressure on the Fed's independence.
Today's rally in the dollar index to a 1.5-week high is negative for precious metals. Also, reduced expectations for another rate cut at the December FOMC are weighing on precious metals meeting following the recent slew of hawkish Fed comments. The chances of a Fed rate cut at next month's FOMC meeting fell to 48% today from 70% earlier this month.
Strong central bank demand for gold is supportive of prices, following the most recent news that showed bullion held in China's PBOC reserves rose to 74.09 million troy ounces in October, the twelfth consecutive month the PBOC has boosted its gold reserves. Also, the World Gold Council recently reported that global central banks purchased 220 MT of gold in Q3, up 28% from Q2.
Since posting record highs in mid-October, long liquidation pressures have weighed on precious metals prices. Holdings in gold and silver ETFs have recently fallen after posting 3-year highs on October 21.
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.
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