Dollar Rises as Treasury Yields Advance
The dollar index (DXY00) on Wednesday rose by +0.92%. Higher T-note yields Wednesday supported moderate gains in the dollar. Also, better-than-expected U.S. economic data Wednesday on Sep ADP employment change and Sep ISM services were hawkish for Fed policy and bullish for the dollar. Finally, hawkish comments from San Francisco Fed President Daly were bullish for the dollar when she said market anticipation of interest rate cuts next year is "misplaced."
The U.S. Sep ADP employment change rose +208,000, stronger than expectations of +200,000. Also, the Aug ADP employment change was revised higher to +185,000 from the previous reported +132,000.
The U.S. Aug trade deficit shrank to -$67.4 billion from a revised -$70.5 billion in July, narrower than expectations of -$67.7 billion and the smallest deficit in 15 months.
The U.S. Sep ISM services index fell -0.2 to 56.7, stronger than expectations of 56.0.
San Francisco Fed President Daly said the Fed is "resolute" in raising interest rates to curb inflation. She added that market anticipation of interest rate cuts next year is "misplaced," as the Fed aims to keep policy tight to secure 2% inflation.
EUR/USD (^EURUSD) on Wednesday fell by -0.92%. A stronger dollar Wednesday weighed on the euro. Also, weaker-than-expected Eurozone economic news is bearish for EUR/USD after the Eurozone Sep S&P Global composite PMI was revised downward to its steepest pace of contraction in 20 months. EUR/USD remained under pressure Wednesday on comments from Swiss National Bank Governing Board member Maechler who said she is seeing increasing signs of second-round inflation effects in the Eurozone.
The Eurozone Sep S&P Global composite PMI was revised downward by -0.1 to 48.1 from the originally reported 48.2, the steepest pace of contraction in 20 months.
USD/JPY (^USDJPY) on Wednesday rose by +0.25%. The yen Wednesday fell back from a 1-week high in overnight trade and moved moderately lower. Higher T-note yields Wednesday weighed on the yen. USD/JPY today initially fell to a 1-week low as the yen strengthened after today’s economic news showed the Japan Sep Jibun Bank services PMI was revised higher.
The Japan Sep Jibun Bank services PMI was revised upward by +0.3 to 52.2 from the previously reported 51.9.
December gold (GCZ22) Wednesday closed down -9.70 (-0.56%), and December silver (SIZ22) closed down -0.555 (-2.63%). Gold and silver Wednesday settled moderately lower. A stronger dollar Wednesday weighed on metals prices. Also, higher global bond yields Wednesday undercut gold prices. In addition, hawkish comments from San Francisco Fed President Daly weighed on gold when she said the Fed is "resolute" in raising interest rates to curb inflation. Gold prices continue to be undercut by fund liquidation as long positions in gold ETF’s dropped to a 2-1/4 year low Tuesday.
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