At a Glance
- The US Dollar Index (DXY00) declined by 0.49% on Thursday, influenced by a significant surge in US job cuts and the ongoing government shutdown, which could prompt the Federal Reserve to lower interest rates.
- Market sentiment favored dollar weakness following a report showing a 175% year-over-year increase in US job cuts in October, reaching a 22-year high for the month.
- Despite the downtrend, dollar losses were capped by falling stock markets, increasing demand for the dollar as a safe haven, and hawkish remarks from Fed officials suggesting a pause in rate cuts.
- EUR/USD saw a gain of 0.49% driven by dollar weakness and supportive comments from ECB Vice President Guindos regarding Eurozone growth, though tempered by mixed retail sales and industrial production data.
- USD/JPY fell 0.66% as the dollar weakened against the yen, supported by lower T-note yields and an upward revision to Japan’s October S&P services PMI, despite persistent concerns about real earnings.
- Precious metals, including gold and silver, experienced modest losses after initially rising, pressured by hawkish Federal Reserve commentary and concerns about industrial metal demand, although underlying safe-haven demand persists from geopolitical risks and central bank activity.
Global Market Rundown: Dollar Index, Forex, and Commodities
The US Dollar Index (DXY00) experienced a downturn on Thursday, marking a 0.49% decrease. This retreat was largely attributed to a report indicating that US job cuts in October had escalated by 175% year-over-year, reaching the highest level in 22 years. This development fueled expectations that the Federal Reserve might consider reducing interest rates. Additionally, the dollar remained under pressure due to the prevailing US government shutdown, a situation that could negatively impact the US economy and increase the likelihood of Fed rate cuts.
💡 Despite the downward pressure, the dollar’s losses were somewhat contained. A decline in stock markets on Thursday boosted liquidity demand for the dollar, providing a degree of support. Furthermore, hawkish statements from influential Fed officials, including Chicago Fed President Austan Goolsbee and Cleveland Fed President Beth Hammack, who indicated a preference against further rate cuts, offered some bullish sentiment for the dollar.
Key Economic Indicators and Federal Reserve Stance
The Challenger report revealed a staggering +175.3% year-over-year surge in US job cuts for October, totaling 153,074. This marked the most significant increase in seven months and the highest figure for an October in two decades. Year-to-date, job cuts have surpassed one million, a level not seen since the pandemic, while US employers announced the fewest hiring intentions since 2011.
Federal Reserve officials delivered hawkish commentary on Thursday, which was seen as supportive of the dollar. Chicago Fed President Austan Goolsbee expressed unease about the Fed’s ongoing interest rate cuts, citing the absence of inflation data during the government shutdown. Similarly, Cleveland Fed President Beth Hammack stated her concern about high inflation and advocated for a monetary policy stance that leans against it, suggesting a mildly restrictive stance for our policy rate to ensure that inflation returns to 2% in a timely fashion.
📊 Market participants are currently pricing in a 70% probability that the Federal Open Market Committee (FOMC) will implement a 25 basis point cut to the fed funds target range at its upcoming meeting on December 9-10.
Euro and Yen Performance Amidst Central Bank Divergence
The EUR/USD pair advanced by 0.49% on Thursday, with dollar weakness being a primary driver for the euro’s gain. The euro also received a boost from optimistic remarks by ECB Vice President Guindos, who expressed increased optimism regarding Eurozone economic growth. However, the euro’s upward momentum was tested by a surprise decline in Eurozone September retail sales and a less-than-expected rise in German September industrial production.
📌 The divergence in central bank policies is a supportive factor for the euro. The European Central Bank (ECB) is perceived as having concluded its rate-cut cycle, whereas the Federal Reserve is anticipated to enact several more rate reductions by the end of 2026.
The Eurozone’s September retail sales unexpectedly contracted by -0.1% month-over-month, contrary to expectations of a +0.2% increase. German industrial production in September rose by 1.3% month-over-month, falling short of the anticipated 3.0% rise.
ECB Vice President Guindos noted the European economy’s resilience and better-than-projected growth. He also highlighted positive inflation news, particularly the behaving service price gains.
⚡ Swaps markets are indicating a low 5% chance of a 25 basis point rate cut by the ECB at its policy meeting on December 18.
The USD/JPY currency pair decreased by 0.66% on Thursday. The yen strengthened amidst the broader weakness observed in the dollar. Lower US Treasury note yields also contributed to supporting the yen. Furthermore, an upward revision to Japan’s October S&P services Purchasing Managers’ Index (PMI) provided a bullish signal for the yen. On the negative side, Japan’s September real cash earnings fell for the ninth consecutive month, a factor that could influence the Bank of Japan’s (BOJ) policy decisions.
The yen has recently faced weakness attributed to Japanese political uncertainty and a delayed BOJ rate hike. Current market expectations suggest a 51% chance of a BOJ rate hike at its next policy meeting on December 19.
✅ Japan’s October S&P services PMI was revised upwards by 0.7 points to 53.1, from the previously reported 52.4.
Japan’s September real cash earnings saw a year-over-year decline of 1.4%, marking the ninth consecutive month of contraction.
Precious Metals React to Economic Data and Fed Commentary
December COMEX gold futures closed down 0.05% on Thursday, while December COMEX silver futures saw a decline of 0.14%.
Precious metals gave up earlier gains on Thursday, ultimately posting modest losses. Hawkish comments from Federal Reserve officials weighed on metal prices. Chicago Fed President Austan Goolsbee’s concerns about the lack of inflation data and Cleveland Fed President Beth Hammack’s preference for maintaining restrictive policy both suggested a tighter stance, which is generally bearish for precious metals.
📍 Concerns regarding industrial metals demand also impacted silver prices on Thursday, following the unexpected decline in Eurozone September retail sales and weaker-than-expected German September industrial production.
Initially, precious metals saw upward movement on Thursday, driven by a weaker dollar. The Challenger report, indicating the largest October job cuts in 22 years, also initially supported precious metals by reinforcing expectations for additional Fed rate cuts.
⚡ Underlying safe-haven demand for precious metals continues amid the ongoing US government shutdown, uncertainty surrounding US tariffs, geopolitical risks, central bank purchases, and concerns about the Fed’s independence.
Gold prices retained some carry-over support from the World Gold Council’s report indicating that global central banks acquired 220 metric tons of gold in Q3, a 28% increase from the previous quarter.
Since reaching record highs in mid-October, precious metals have faced downward pressure from long liquidation. Holdings in gold and silver ETFs have recently decreased after posting three-year highs on October 21.
Expert Summary
Thursday’s market movements reflected a complex interplay of economic data and central bank signals. While escalating US job cuts and the government shutdown initially pressured the dollar and supported precious metals, hawkish Federal Reserve commentary and easing geopolitical concerns provided a counterbalance, leading to mixed results across major currency pairs and commodities.
📌 The divergence in monetary policy between the Federal Reserve and the European Central Bank remains a key theme, influencing the euro’s trajectory, while yen traders watch for signals of a potential BOJ policy shift amidst ongoing domestic economic factors.
📊 The continued focus on inflation data, government stability, and central bank forward guidance suggests that currency and commodity markets will remain volatile as investors digest incoming economic information.