Dollar Index Shows Minor Gains Amid Mixed Economic Data
President-elect Trump’s Tariff Plans Influence Currency Movement
The dollar index (DXY00) rose by +0.07% today. After President-elect Trump announced plans to impose a 10% tariff on imports from China and a 25% tariff on goods from Canada and Mexico on his first day in office, the dollar saw a slight boost. However, following a stock market rally, demand for the dollar decreased, erasing most of its early gains. Economic reports present a mixed view: U.S. consumer confidence reached a 16-month high in November, while new home sales for October dropped to their lowest point in nearly two years.
The U.S. September S&P CoreLogic composite-20 home price index decreased to 4.57% year-on-year from +5.21% in August, falling short of the expected +4.70%. This represents the smallest year-on-year increase in a year.
In October, new home sales plummeted by -17.2% month-on-month to a two-year low of 610,000, significantly below forecasts of 725,000. The Conference Board’s U.S. consumer confidence index for November climbed +2.1 to a 16-month high of 111.7, just shy of predictions at 111.8. Meanwhile, the Richmond Fed’s manufacturing outlook remained unchanged at -14, missing expectations for an improvement to -11. Markets now assign a 59% likelihood of a -25 basis point rate cut at the Federal Open Market Committee meeting scheduled for December 17-18.
Euro Rebounds, Impacted by ECB Comments
EUR/USD (^EURUSD) rose by +0.08% today. The euro saw moderate gains following President-elect Trump’s tariff declarations, though these gains were tempered by dovish remarks from ECB Vice President Guindos, who stated, “If the ECB’s projections are confirmed, we will continue making our monetary policy stance less restrictive.” As a result, the yield on the 10-year German bund fell to a five-week low, affecting interest rate differentials that support the euro.
Market swaps are currently pricing in a 100% chance of a -25 basis point rate cut by the ECB at their meeting on December 12, with a 26% chance for a more aggressive -50 basis point cut.
Japanese Yen Strengthens on Producer Price Data
USD/JPY (^USDJPY) decreased by -0.38% today as the yen strengthened, reaching a two-week high against the dollar. This surge followed the revelation that Japan’s November producer prices exceeded expectations, suggesting a potential shift in the Bank of Japan’s (BOJ) policy. Last Friday, Japan’s national core CPI for October surged at its fastest rate in six months, raising speculation that the BOJ may consider raising interest rates at their upcoming policy meeting.
November’s PPI services prices in Japan increased +2.9% year-on-year, surpassing predictions of +2.5%.
Precious Metals Make Gains Amid Global Tensions
In precious metals, December gold (GCZ24) rose by +4.80 (+0.18%), and December silver (SIZ24) climbed +0.191 (+0.63%). After hitting a one-week low earlier, gold and silver are now modestly higher, influenced by President-elect Trump’s tariff announcements, which could lead to inflation spikes, traditionally seen as positive for precious metals. Additionally, dovish comments from the ECB boosted demand for gold as a safe-haven asset. The ongoing conflict between Ukraine and Russia has also reinforced this trend.
Initially, the precious metals market faced pressure, with gold and silver touching one-week lows due to easing tensions in the Middle East. Israeli officials indicated a potential cease-fire deal with Hezbollah, contributing to a stronger dollar and rising T-note yields. Furthermore, robust stock market performance has reduced the need for safe-haven investments.
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 provided are solely for informational purposes. For more details, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.
