The dollar index (DXY00) saw a rise of +0.25% today, driven by positive news from the Nov Empire manufacturing general business conditions survey. The unexpected increase to a 1-year high boosted market sentiment towards the dollar. Additionally, last week’s statements from Fed presidents favoring keeping interest rates steady reduced the likelihood of a Fed rate cut at the upcoming FOMC meeting to 41%, down from 70% earlier this month.
The US Nov Empire manufacturing general business conditions survey surpassed expectations by rising +8.0 to 18.7, marking a significant improvement from the anticipated decline to 5.8. This positive data further supported the dollar’s strength in the market.
On the other hand, EUR/USD (^EURUSD) experienced a decline of -0.30% today, influenced by a stronger dollar. Comments from ECB Vice President Luis de Guindos regarding financial stability risks in the Eurozone added pressure on the euro. However, the European Commission’s decision to raise its 2025 Eurozone GDP estimate provided some support for the currency.
Central bank divergence also played a role in supporting the euro, with the ECB nearing the end of its rate-cut cycle while the Fed is expected to implement multiple rate cuts by the end of 2026.
The Japanese yen faced pressure today, with USD/JPY (^USDJPY) rising by +0.21%. Concerns arose following news of the Japanese economy contracting by the most in 1.5 years in Q3. This development could lead Prime Minister Takaichi to propose a stimulus package that increases Japan’s budget deficit. Despite this, an upward revision to Japan’s Sep industrial production offered some support for the yen.
The yen’s recent weakness, falling to a 9.5-month low against the dollar, can be attributed to Japanese political uncertainty and a delayed BOJ rate hike. Japan’s Q3 GDP report showed a decline of -1.8% (q/q annualized), weaker than expected but better than anticipated. The yen also benefited from the upward revision of Japan’s Sep industrial production.
In the precious metals market, December COMEX gold (GCZ25) and silver (SIZ25) both experienced declines today due to the stronger dollar. Fading expectations for a rate cut at December’s FOMC meeting, following recent hawkish Fed comments, contributed to the downward pressure on precious metals prices.
Despite the decline, precious metals continue to attract some safe-haven demand amid uncertainties surrounding US tariffs, geopolitical risks, central bank buying, and political pressures on the Fed’s independence. Silver received support from the positive news of the Nov Empire manufacturing general business conditions survey reaching a 1-year high and the European Commission’s upward revision of its 2025 Eurozone GDP forecast.
Strong central bank demand for gold remains a supportive factor for prices, with recent reports showing an increase in bullion held in China’s PBOC reserves. Additionally, global central banks purchased 220 MT of gold in Q3, signaling a 28% increase from Q2.
Although long liquidation pressures have weighed on precious metals prices since mid-October, holdings in gold and silver ETFs have seen a decline after reaching 3-year highs on October 21.
Overall, the market dynamics surrounding currencies, precious metals, and central bank policies continue to shape the trading landscape, with investors closely monitoring economic indicators and geopolitical developments for future market movements.
