The dollar index (DXY00) on Wednesday fell by -0.24%. Strength in the euro weighed on the dollar as the Eurozone Q3 GDP report was stronger than expected. The dollar added to its losses after Wednesday’s economic news showed US Q3 GDP grew less than expected.
Losses in the dollar were limited after the US Oct ADP employment report posted its largest increase in 15 months, a hawkish factor for Fed policy. Also, Sep pending home sales posted their largest increase in 4-1/4 years.
The US Oct ADP employment change rose +233,000, showing a stronger labor market than expectations of +111,000 and the biggest increase in 15 months.
US Q3 GDP grew by +2.8% (q/q annualized), slightly weaker than expectations of +2.9%. Q3 personal consumption rose +3.7%, stronger than expectations of +3.3%, and the Q3 core PCE price index eased to +2.2% from 2.8% in Q2.
US Sep pending home sales rose +7.4% m/m, stronger than expectations of +1.9% m/m and the largest increase in 4-1/4 years.
The markets are discounting the chances at 94% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) Wednesday climbed to a 1-week high and finished up by +0.35%. Signs of strength in the Eurozone economy are bullish for the euro as the Eurozone Q3 GDP grew more than expected. Also, signs of sticky price pressures are hawkish for ECB policy and supportive for the euro after German Oct CPI rose more than expected. Gains in the euro were limited after the Eurozone Oct economic confidence index unexpectedly fell to a 6-month low.
Eurozone Q3 GDP grew +0.4% q/q and +0.9% y/y, stronger than expectations of +0.2% q/q and +0.8% y/y.
Eurozone Oct economic confidence unexpectedly fell -0.7 to a 6-month low +0.4% q/q and +0.9% y/y, stronger than expectations of +0.2% q/q and +0.8% y/y.
German Oct CPI (EU harmonized) rose +0.4% m/m and +2.4% y/y, stronger than expectations of +0.2% m/m and +2.1% y/y.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 20% for a -50 bp rate cut at the same meeting.
USD/JPY (^USDJPY) Wednesday rose by +0.04%. The yen on Wednesday finished slightly lower. The yen was under pressure Wednesday after the Japan Oct consumer confidence index fell more than expected to a 5-month low. The yen also continues to see weakness from Japanese political uncertainty after the LDP-led coalition lost its majority in the lower house of Parliament in this past weekend’s election.
Short covering Wednesday limited losses in the yen ahead of Thursday’s BOJ meeting, when the BOJ is expected to keep interest rates unchanged.
The Japan Oct consumer confidence index fell -0.7 to a 5-month low of 36.2, weaker than expectations of 36.7.
December gold (GCZ24) Wednesday closed up +19.70 (+0.71%), and December silver (SIZ24) closed down -0.366 (-1.06%). Precious metals Wednesday settled mixed, with Dec gold posting a new contract high and nearest-futures (X24) gold posting a record high of $2,789.00 per ounce. A weaker dollar Wednesday was supportive of precious metals. Gold also climbed on safe-haven demand from US political uncertainty ahead of next Tuesday’s US election. In addition, there is also Japanese political uncertainty after the ruling LDP lost its majority in the lower house in this past weekend’s election.
Signs of strong global demand for gold are supporting gold prices after the World Gold Council reported Wednesday that Q3 global gold demand rose +5% y/y to a record and that global gold consumption rose above $100 billion for the first time. Silver prices were undercut after US Q3 GDP grew less than expected, which was a negative factor for industrial metals demand.
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