Dollar Weakens Amid Mixed Economic Signals
The dollar index (DXY00) fell by -0.24% on Wednesday, influenced by strong euro performance following a positive Eurozone GDP report for Q3. The dollar’s decline continued as U.S. Q3 GDP growth also came in lower than anticipated.
U.S. Employment Data Offers Glimmer of Hope
Despite the dollar’s losses, news from the U.S. provided some support. The October ADP employment report indicated a surge in job growth, reporting an increase of +233,000 jobs, which surpassed the expected +111,000 and marks the highest gain in 15 months. Additionally, pending home sales in September rose by +7.4% month-over-month, the most substantial jump in over four years.
The Q3 GDP growth rate was +2.8% (annualized), slightly below the forecast of +2.9%. Within this report, personal consumption increased by +3.7%, outperforming the expected +3.3%. Moreover, the core PCE price index, which measures inflation, dropped to +2.2% from 2.8% in Q2.
Market Expectations for Interest Rates
Market predictions suggest a 94% likelihood of a -25 basis point rate cut during the FOMC meeting on November 6-7, and no significant chance of a -50 basis point reduction at that gathering.
Eurozone Performance Boosts Euro
The EUR/USD (^EURUSD) rose to a one-week high, closing up +0.35%. Better-than-expected Eurozone GDP growth, which was +0.4% quarter-on-quarter and +0.9% year-on-year, helped support the euro. However, October’s economic confidence index in the Eurozone unexpectedly dropped to a six-month low, limiting the euro’s gains.
Meanwhile, German October CPI figures showed a rise of +0.4% month-over-month and +2.4% year-on-year, exceeding expectations, which suggests persistent price pressures; in response, market expectations reflect a 100% chance of a -25 basis point rate cut by the European Central Bank in December.
Japanese Yen Faces Challenges
For the USD/JPY (^USDJPY), some slight gains were noted with an increase of +0.04%. The yen is facing pressures following Japan’s October consumer confidence index, which fell to a five-month low of 36.2, below the anticipated 36.7. Political uncertainty following the recent election has added to the yen’s challenges.
Mixed Performance in Precious Metals
Gold prices increased with December gold (GCZ24) closing up +19.70 (+0.71%), reaching a new contract high. Conversely, December silver (SIZ24) saw a decline of -0.366 (-1.06%). Precious metals had a mixed day as demand for gold surged amid political uncertainty in the U.S. ahead of the upcoming election and after the ruling LDP party in Japan lost its majority. The World Gold Council reported that global gold demand rose by +5% year-over-year in Q3, indicating strong global interest, while silver prices faced pressure due to weaker industrial demand stemming from lower-than-expected U.S. GDP growth.
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On the date of publication, Rich Asplund did not hold (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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
