The dollar index (DXY00) on Wednesday fell by -0.07% on a decline in T-note yields. Also, the dollar was under pressure from reduced safe-haven demand after NATO said the Russian missile that fell on Poland was not an intentional attack. However, the dollar saw underlying support as a fall in stocks Wednesday sparked some liquidity demand for the dollar.
Wednesday’s U.S. economic news was mixed for the dollar. On the bearish side, Oct manufacturing production rose +0.1% m/m, weaker than expectations of +0.2% m/m. Also, the Nov NAHB housing market index fell -5 to a 2-1/2 year low of 33, weaker than expectations of 36. On the positive side, Oct retail sales rose +1.3% m/m, stronger than expectations of +1.0% m/m and the biggest increase in 8 months.
Fed comments Wednesday were mixed for the dollar. On the bearish side, Fed Governor Waller said economic data over the past few weeks have made him "more comfortable stepping down to a 50 bp rate hike" at the December FOMC meeting. Conversely, San Francisco Fed President Daly said, "a pause in Fed rate hikes is not part of the discussion now," and 4.75% to 5.25% was a "reasonable" range for where policymakers could lift interest rates and then go on hold. Also, New York Fed President Williams said the Fed's focus on fighting inflation is "of paramount importance" and "using monetary policy to mitigate financial stability vulnerabilities can lead to unfavorable outcomes for the economy."
EUR/USD (^EURUSD) on Wednesday closed up by +0.37% but remained below Tuesday’s 4-1/2 month high. Dollar weakness supported the euro Wednesday, along with an easing of geopolitical risks after NATO said the Russian-made missile that landed in Poland was likely fired by Ukrainian air defense forces. EUR/USD also found support Wednesday on hawkish comments from ECB Governing Council member Muller who said the ECB should deliver another "substantial" increase in interest rates at next month's meeting. Â
The ECB’s Financial Stability Review was bearish for EUR/USD as it said record inflation is hurting consumers' ability to service debts, while Europe's worsening growth prospects threaten corporate profits.
ECB Governing Council member Muller said October's Eurozone record inflation reading showed continued price increases and the ECB should deliver another "substantial" increase in interest rates at next month's meeting.
USD/JPY (^USDJPY) on Wednesday rose by +0.06%. The yen fell slightly Wednesday on bearish Japanese economic news. Losses in the yen were limited after the 10-year T-note yield dropped to a 6-week low.
Japan Sep core machine orders unexpectedly fell -4.6% m/m, weaker than expectations of +0.7% m/m.
The Japan Sep tertiary industry index unexpectedly fell -0.4% m/m, weaker than expectations of +0.6% m/m.
December gold (GCZ2) Wednesday closed down -1.00 (-0.06%), and December silver (SIZ22) closed up +0.006 (+0.03%). Precious metals prices Wednesday were little changed. A weaker dollar Wednesday was a supportive factor for metals prices. Gold also found support from lower global government bond yields. Reduced safe-haven demand for precious metals limited gains as geopolitical risks in Europe eased after NATO said a Russian missile that landed in Poland was not an intentional act. Gold continues to be undercut by fund liquidation as long positions in gold ETF’s dropped to a new 2-1/2 year low Tuesday.
More Forex News from Barchart
- Stocks Decline on Weakness in Retailers and Chip Stocks
- Dollar Falls Back as Signs of Slower Inflation May Slow Fed Rate Hikes
- The Dollar Index Corrects
- Stocks Rally as Slower Inflation Eases Fed Rate-Hike Concerns
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