Dollar Undercut by Lower T-note Yields

The dollar index (DXY00) on Wednesday fell by -0.47% due to lower T-note yields.  Also, there was strength in the euro due to hawkish comments by ECB Governing Council member Kazimir who signaled support for a +75 bp rate hike at next week's ECB meeting.   

Wednesday’s U.S. economic news was mixed for the dollar.  Oct consumer credit rose +$27.078 billion, slightly weaker than expectations of +$28.0 billion.  Meanwhile, Q3 nonfarm productivity was revised upward to +0.8% from the initially reported +0.6%.  Q3 unit labor costs were revised downward to +2.4% from the initially reported +3.1%.

EUR/USD (^EURUSD) on Wednesday rose by +0.40% on better-than-expected Eurozone Q3 GDP and German industrial production reports.  The euro also received a boost from comments by ECB Governing Council member Kazimir who signaled support for a third straight +75 bp rate hike at next week's ECB meeting.

Eurozone Q3 GDP was revised upward to +0.3% q/q and +2.3% y/y from the initially reported +0.2% q/q and +2.1% y/y.

German Oct industrial production fell -0.1% m/m, stronger than expectations of -0.6% m/m.

ECB Governing Council member Kazimir signaled support for a third straight +75 bp rate hike at next week's ECB meeting when he said a slowdown in Eurozone inflation to 10% in November is "no reason to slow monetary tightening."

USD/JPY (^USDJPY) on Wednesday fell by -0.44%.  The yen erased overnight losses and moved higher Wednesday after the 10-year T-note yield dropped to a 2-1/2 month low.  The yen initially weakened in overnight trade on comments from BOJ Board member Nakamura who said the BOJ needs to continue with monetary easing as the economy is still recovering from the pandemic. 

Wednesday’s Japanese economic news supported the yen after the Japan Oct leading index CI rose +0.8 to 99.0, stronger than expectations of 98.3.

February gold (GCG3) on Wednesday closed up +15.60 (+0.88%), and March silver (SIH23) closed up +0.587 (+2.63%).  Precious metals Wednesday rallied moderately.  Dollar weakness Wednesday was bullish for metals prices.  Gold prices also garnered support Wednesday from a decline in global government bond yields.  In addition, gold moved higher on increased safe-haven demand after weaker-than-expected Chinese trade news Wednesday fueled concern about a global economic slowdown.  Gold continues to be undercut by fund liquidation as long positions in gold ETFs dropped to a new 2-1/2 year low Monday.

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