The dollar index (DXY00) on Wednesday rose by +0.65% and posted a 2-week high. The dollar rallied on Wednesday after the Bureau of Labor Statistics (BLS) canceled the publication of the Oct employment report, which removes key data before next month's FOMC meeting and lowers the chances of a Fed rate cut. The dollar raced to its high on Wednesday afternoon on the hawkish minutes of the October 28-29 FOMC meeting, which stated that "many" Fed officials favored keeping interest rates steady for the remainder of the year.
Weakness in the yen also supported the dollar as the yen tumbled to a 9.75-month low on concern that the Japanese government would support a stimulus package that would substantially increase Japan's debt burden. Wednesday's US trade news was also bullish for 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 minutes of the October 28-29 FOMC meeting were hawkish as "many" officials said it would likely be appropriate to keep interest rate steady for the remainder of 2025.
The markets are discounting a 28% 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) on Wednesday fell by -0.46% and posted a 1.5-week low. Wednesday's stronger dollar weighed 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) on Wednesday rose by +0.95%. The yen tumbled to a 10-month low against the dollar on Wednesday due to dovish comments from Goushi Kataoka, a panelist advising Japanese Prime Minister Takaichi, which undercut the yen when he said the BOJ is unlikely to raise interest rates again before March. Losses in the yen accelerated amid concerns about Japan's debt burden, as Mr. Kataoka also 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.
Wednesday'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 10% chance of a BOJ rate hike at the next policy meeting on December 19.
December COMEX gold (GCZ25) on Wednesday closed up +16.30 (+0.40%), and December COMEX silver (SIZ25) closed up +0.333 (+0.66%).
Gold and silver prices rose on Wednesday, recovering some of the heavy losses from the past week. Wednesday's comments 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.
Precious metals fell back from their best levels after the dollar index rallied to a 2-week high. Also, reduced expectations for another rate cut at the December FOMC weighed on precious metals. The BLS on Wednesday canceled the publication of the Oct employment report, which removes key data before next month's FOMC meeting and lowered the chances of a Fed rate cut to 28% from 70% last week. Also, the minutes of the October 28-29 FOMC meeting were hawkish and weighed on precious metals as "many" officials favored keeping interest rates steady at next month's FOMC meeting.
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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