The dollar index (DXY00) tumbled to a 1.75-month low on Thursday and finished down by -0.43%. The dollar was under pressure Thursday on negative carryover from Wednesday after the FOMC cut the federal funds target range by -25 bp and said it would boost liquidity in the financial system and begin purchasing $40 billion a month in T-bills.
The dollar added to its losses on Thursday after US weekly jobless claims rose more than expected to a 3-month high, a sign of labor market weakness that is dovish for Fed policy. A supportive factor for the dollar was Thursday's news showing that the US Sep trade deficit unexpectedly shrank to its smallest level in 5.25 years.
The dollar has also been undercut recently by concerns that President Trump intends to appoint a dovish Fed Chair, which would be bearish for the dollar. Mr. Trump said last that he will announce his selection for the new Fed Chair in early 2026. Bloomberg reported last week that National Economic Council Director Kevin Hassett is the most likely choice as the next Fed Chair, seen by markets as the most dovish candidate.
US weekly initial unemployment claims rose by +44,000 to a 3-month high of 236,000, showing a weaker labor market than expectations of 220,000.
The US Sep trade deficit unexpectedly shrank to -$52.8 billion versus expectations of a widening to -$63.1 billion and the smallest deficit in 5.25 years.
The markets are discounting a 24% chance that the FOMC will cut the fed funds target range by 25 bp at the January 27-28 FOMC meeting.
EUR/USD (^EURUSD) climbed to a 2.25-month high on Thursday and finished up by +0.39%. The euro rose on Thursday amid weakness in the dollar. The euro also has carryover support from Wednesday when ECB President Lagarde said the ECB will likely raise its economic growth forecasts at next week's policy meeting.
Swaps are pricing in a 1% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) on Thursday fell by -0.25%. The yen moved higher on Thursday amid a weaker dollar. Also, Thursday's economic news showing that Japan's Q4 BSI large manufacturing business confidence rose to a 1-year high is supportive of the yen. Lower T-note yields on Thursday were also bullish for the yen.
The Japan Q4 BSI large manufacturing business conditions confidence index rose to 4.7 from 3.8 in Q3, the highest in a year.
The markets are discounting an 91% chance of a BOJ rate hike at the next policy meeting on December 19.
February COMEX gold (GCG26) on Thursday closed up +88.30 (+2.09%), and March COMEX silver (SIH26) closed up +3.563 (+5.84%).
Gold and silver prices surged on Thursday, with gold soaring to a 7-week high and Mar silver posting a contract high. Also, nearest-futures (Z25) silver posted an all-time high of $63.93 a troy ounce.
Thursday's fall in the dollar index to a 1.75-month low is bullish for metals prices. Precious metals also have carryover support from Wednesday, when the Fed said it would boost liquidity in the financial system and purchase $40 billion of T-bills per month, which fuels demand for precious metals as a store of value. In addition, precious metals have safe-haven demand tied to uncertainty over US tariffs and geopolitical risks in Ukraine, the Middle East, and Venezuela. Finally, precious metals are supported by concerns that the Fed will pursue an easier monetary policy as President Trump intends to appoint a dovish Fed Chair.
Strong central bank demand for gold is supportive of prices, following the recent news that bullion held in China's PBOC reserves rose by +30,000 ounces to 74.1 million troy ounces in November, the thirteenth consecutive month the PBOC has boosted its gold reserves. Also, the World Gold Council recently reported that global central banks purchased 220 MT of gold in Q3, up +28% from Q2.
Silver has support due to concerns about tight Chinese silver inventories. Silver inventories in warehouses linked to the Shanghai Futures Exchange on November 21 fell to 519,000 kilograms, the lowest level in 10 years.
Since posting record highs in mid-October, long liquidation pressures have weighed on precious metals prices, as ETF holdings have recently fallen after reaching 3-year highs on October 21. However, fund demand for silver has rebounded, as long holding in silver ETFs rose to a 3.25-year high last Friday.
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.
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