The dollar index (DXY00) today is up by +0.25%.  The dollar is climbing on today’s news that the Nov Empire manufacturing general business conditions survey unexpectedly rose to a 1-year high.  The dollar also has carryover support from last week when a parade of Fed presidents said they favored keeping interest rates steady, which reduced the chances of a Fed rate cut at next month’s FOMC meeting to 41% from 70% earlier this month. 

The US Nov Empire manufacturing general business conditions survey unexpectedly rose +8.0 to a 1-year high of 18.7, stronger than expectations of a decline to 5.8.

The markets are discounting a 41% 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 -0.30%.  The euro is under pressure today from a stronger dollar. Also, comments today from ECB Vice President Luis de Guindos weighed on the euro when he said financial stability risks in the Eurozone remain elevated.  Today’s action by the European Commission to raise its 2025 Eurozone GDP estimate was supportive for the euro.   

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. 

The European Commission raised its 2025 Eurozone GDP forecast to +1.3% from a May forecast of +0.9% and kept its 2025 Eurozone inflation forecast unchanged from May at +2.1%.

ECB Vice President Luis de Guindos said financial stability risks "remain elevated in view of uncertainty over geoeconomic trends and the ultimate impact of tariffs in a volatile international environment."

Swaps are pricing in a 3% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.

USD/JPY (^USDJPY) today is up by +0.21%.  The yen is under pressure on concern that today’s news that the Japanese economy contracted by the most in 1.5 years in Q3, which would bolster Prime Minister Takaichi’s case to compile an ambitious stimulus package that increases Japan’s budget deficit.  Today’s upward revision to Japan’s Sep industrial production was supportive for the yen.  Also, higher Japanese government bond yields are supportive for the yen after the 10-year JGB bond yield rose to a 17-year high today of 1.737%. 

The yen has recently been weak, falling to a 9.5-month low against the dollar last Wednesday due to Japanese political uncertainty and a delayed BOJ rate hike.  Also, there is concern about an even higher Japanese government debt load after Japanese Prime Minister Takaichi recently said she would drop an annual budget-balancing goal. 

Japan’s Q3 GDP fell -1.8% (q/q annualized), the weakest report in 1.5 years but better than expectations of -2.4%.  The Q3 deflator rose +2.8% y/y, a smaller increase than expectations of +3.1% y/y.

Japan Sep industrial production was revised upward by +0.4 to +2.6% m/m from the previously reported +2.2% m/m.

The markets are discounting a 30% chance of a BOJ rate hike at the next policy meeting on December 19.

December COMEX gold (GCZ25) today is down -30.20 (-0.74%), and December COMEX silver (SIZ25) is down -0.306 (-0.60%).

Precious metals are moving lower today due to a stronger dollar.  Precious metals prices are also being undercut by fading expectations for another rate cut at December’s FOMC meeting after the recent slew of hawkish Fed comments.  The chances of a Fed rate cut at next month’s FOMC meeting fell to 41% today from 70% earlier this month. 

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. 

Silver garnered some support from today’s news that the Nov Empire manufacturing general business conditions survey unexpectedly rose to a 1-year high, a bullish factor for industrial metals demand.  Also, today’s hike by the European Commission in its 2025 Eurozone GDP forecast was positive for industrial metals demand.

Strong central bank demand for gold is supportive of prices, following the most recent news that showed bullion held in its 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.

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