The dollar index (DXY00) fell -0.44% on Tuesday. The dollar is falling after weaker-than-expected US economic news on September retail sales, September core PPI and weekly ADP employment bolstered chances of a Fed rate cut at next month’s FOMC meeting. Additionally, falling bond yields have weakened dollar interest rate differentials after the 10-year Treasury yield fell to a 3.5-week low on Tuesday at 3.987%. The dollar extended its losses after the US Conference Board’s November consumer confidence index fell more than expected to a seven-month low.
US Retail Sales in September rose +0.2% MoM, below expectations of +0.4% MoM. September retail sales, excluding automobiles, rose +0.3% MoM, right in line with expectations.
US September PPI final demand rose +2.7% YoY, stronger than expectations of +2.6% YoY. However, the September PPI excluding food and energy rose +2.6% year-on-year, below expectations of +2.7% year-on-year.
ADP’s latest weekly update showed that US private payrolls fell by an average of -13,500 per week in the four weeks ending November 8.
The US September S&P CaseShiller Composite-20 Home Price Index rose +1.36% YoY, weaker than expectations of +1.40% YoY and the slowest pace of increase in more than two years.
The US Conference Board’s November consumer confidence index fell -6.8 to a seven-month low of 88.7, weaker than expectations of 93.3.
US Pending Home Sales in October increased +1.9% MoM, stronger than expectations of +0.2% MoM.
Markets are pricing in an 80% chance that the FOMC will reduce the fed funds target range by 25 bps at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) rose +0.45% on Tuesday. Tuesday’s weaker dollar supported the euro. The euro also found support in Tuesday’s economic news, which showed new car registrations in the eurozone in October rose for the fourth consecutive month. Additionally, improved prospects for an end to the war in Ukraine boosted the euro after Ukraine said it had accepted the terms of a peace deal with Russia, although Russia has not yet said whether it accepts the deal.
New car registrations in the eurozone in October increased by +5.8% year-on-year to 917,000 units, the fourth consecutive monthly increase.
Swaps are pricing in a 2% chance that the ECB will cut rates by -25 basis points at the December 18 policy meeting.
USD/JPY (^USDJPY) fell -0.56% on Tuesday. The yen rebounded against the dollar on Tuesday amid concerns that the Japanese government is close to intervening in the currency 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 Treasury yields declined.