The dollar index (DXY00) on Tuesday fell by -0.44%. The dollar is sliding after today’s weaker-than-expected US economic news on Sep retail sales, Sep core PPI, and weekly ADP employment bolstered the chances for a Fed rate cut at next month’s FOMC meeting. Also, falling bond yields have weakened the dollar’s interest rate differentials after the 10-year T-note yield fell to a 3.5-week low Tuesday at 3.987%. The dollar extended its losses after the Conference Board US Nov consumer confidence index fell more than expected to a 7-month low.
US Sep retail sales rose +0.2% m/m, weaker than expectations of +0.4% m/m. Sep retail sales ex-autos rose +0.3% m/m, right on expectations.
US Sep PPI final demand rose +2.7% y/y, stronger than expectations of +2.6% y/y. However, Sep PPI ex-food and energy rose +2.6% y/y, weaker than expectations of +2.7% y/y.
The latest weekly update from ADP showed US private payrolls fell by an average of -13,500 per week in the four weeks ending November 8.
The US Sep S&P CaseShiller composite-20 home price index rose +1.36% y/y, weaker than expectations of +1.40% y/y and the smallest pace of increase in more than two years.
The Conference Board US Nov consumer confidence index fell -6.8 to a 7-month low of 88.7, weaker than expectations of 93.3.
US Oct pending home sales rose +1.9% m/m, stronger than expectations of +0.2% m/m.
The markets are discounting an 80% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) on Tuesday rose by +0.45%. Tuesday’s weaker dollar was supportive of the euro. The euro also found support on Tuesday’s economic news, which showed that Eurozone Oct new car registrations rose for the fourth consecutive month. In addition, improved prospects for an end to the war in Ukraine boosted the euro after Ukraine said it had agreed to the terms of a peace deal with Russia, although Russia has yet to say if it accepts the agreement.
Eurozone Oct new car registrations rose +5.8% y/y to 917,000 units, the fourth consecutive monthly increase.
Swaps are pricing in a 2% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) on Tuesday fell by -0.56%. The yen rallied against the dollar on Tuesday amid concern that the Japanese government is close to intervening in the forex market to support the yen after Japanese Growth Minister Kiuchi said the government is watching currency movements, including speculative activity, with a high sense of urgency. The yen added to its gains on Tuesday as T-note yields declined.
