The dollar index (DXY00) today is up by +0.29% at a 3-month high. Today’s slump in equity markets has boosted liquidity demand for the dollar. The dollar also had carry-over support from Fed Chair Powell’s warning last week that another rate cut in December is not a foregone conclusion.

Bearish factors for the dollar include lower T-note yields today and the weaker-than-expected report on US Oct Wards total vehicle sales.

5-Year Deficit, October Bottoms, Q4 Rockets: Silver’s Calendar Is Laughing at Bears

Dollar Sees Support as T-note Yields Rise

Dollar Sees Support as T-note Yields Rise

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The dollar is still under pressure from the ongoing US government shutdown. The longer the shutdown is maintained, the more likely the US economy will suffer and the more likely the Fed will have to cut interest rates.

The markets are discounting a 70% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on December 9-10.

As a bearish factor for the dollar, the Oct Wards total vehicle sales slowed to 15.32 million, weaker than expectations of 15.50 million and the fewest in 14 months.

EUR/USD (^EURUSD) today is down by -0.34% and fell to a 3-month low. The main bearish factor for the euro today is the strength of the dollar.

Central bank divergence is supportive of the euro, with the ECB seen as largely finished with its rate-cut cycle, while the Fed is expected to cut rates several more times by the end of 2026.

Comments today from ECB Governing Council member Rehn were neutral for the euro when he said, “Growth in the Eurozone remains sluggish but resilient, while inflation risks are two-sided-upward from goods and food prices, and possible supply disruptions; downward from cheaper energy, a stronger euro and easing wage pressures.” He added that, “In this environment, it’s crucial to maintain full flexibility in decision-making and not commit to any specific interest rate path.”

Swaps are pricing in a 7% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.

USD/JPY (^USDJPY) today is down by -0.48%. The yen recovered from an 8.5-month low today and turned higher as short covering emerged amid signs that Japanese authorities may be close to intervening in currency markets to support the yen, after Japanese Finance Minister Satsuki Katayama said, “I’m seeing one-sided and rapid moves in the currency market.” Also, higher Japanese government bond yields have strengthened the yen’s interest rate differentials, with the 10-year JGB yield rising to a 3-week high of 1.691% today. In addition, lower T-note yields today are also supportive of the yen.