Dollar Little Changed After Mixed US Economic Reports

The dollar index (DXY00) on Tuesday ended the day little changed.   The dollar saw support from Tuesday's positive US consumer confidence report but was undercut by the weaker-than-expected US JOLTS job openings report. 

The dollar was boosted early in the session by a new 3-3/4 month high in the 10-year T-note yield, but the T-note yield fell back later in the day on positive demand for the 7-year T-note auction, thus undercutting the dollar.

The Conference Board's Oct US consumer confidence index rose +9.5 points to a 9-month high of 108.7, much stronger than expectations for a small increase to 99.5. Tuesday’s +9.5 point rise was the largest in three years.  The rise in consumer confidence was due in part to the consumer view that jobs are plentiful. 

Tuesday's US home price reports were stronger than expected.  The FHFA house price index rose +0.3% m/m, which was stronger than expectations of +0.1%.  The S&P CoreLogic CS 20-City US home price index rose +0.35% m/m and +5.20% y/y, stronger than expectations of +0.20% m/m and +5.10%.

The dollar was undercut by Tuesday's news that the Sep US trade deficit rose to $108.2 billion, which was a larger deficit than expectations of -$96 billion and was larger than Aug's revised -$94.2 billion.

US Oct JOLTS job openings fell to a 3-3/4 year low of 7.443 million jobs, which was weaker than expectations of 8.0 million and was down from Aug's revised 7.861 million.

The markets are discounting the chances at 96% for a -25 bp rate cut at the November 6-7 FOMC meeting and at 0% for a -50 bp rate cut at that meeting.

EUR/USD (^EURUSD) ended the day little changed.  The euro continues to be undercut by perceptions that the ECB is much more likely than the Fed to cut rates by -50 bp at their next meetings.

On the positive side for the euro, Tuesday's German Nov GfK consumer confidence index rose to -18.3 from a revised -21.0 in Nov, which was better than expectations for a smaller rise to -20.5.

Also on the positive side for the euro, ECB Vice President Luis de Guindos said that the ECB has made significant progress in bringing down inflation but there are still "substantial risks" for inflation.  His inflation worries suggest he is in no hurry to cut interest rates.

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB for the December 12 meeting and at 41% for a -50 bp rate cut at the same meeting.

USD/JPY (^USDJPY) rose by +0.12%.  The yen continues to see weakness from Japanese political uncertainty after the LDP-led coalition lost its majority in the lower house of Parliament in this past weekend's election.  The yen fell on the reduced chance for an interest rate hike amidst the political uncertainty.

December gold (GCZ24) closed up +25.20 (+0.91%), and December silver (SIZ24) closed up +0.440 (+1.29%).  Precious metals have support from US political uncertainty ahead of next Tuesday's US election.  There is also Japanese political uncertainty after the ruling LDP lost its majority in the lower house in this past weekend's election.  Gold received support as T-note yields and the dollar index fell back later in Tuesday's session.

More Precious Metal News from Barchart

• Dollar See Support from Higher T-note Yields
• Dollar Little Changed on Cross Currents
• Dollar Sees Pressure from Reduced Middle East Risks
• Gold & Silver: 1 ETF to Ride the Precious Metals Boom

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.