Dollar Now Trading At Highest Level Since Dec 2022

CURRENCY FUTURES

The U.S. dollar index was higher in the overnight trade, and there were follow-through gains when the bullish on balance October U.S. producer price index report was released. The greenback is now trading at its highest level since December 2022.

The overall euro zone economy grew by 0.4% in the third quarter from the previous three months,  confirming an earlier flash estimate, which was twice as fast as economists expected.

Euro zone industrial production fell more than anticipated in September with Germany suffering the biggest decline. Industrial production fell by 2.0% compared to the previous month, exceeding a 1.4% drop predicted by economists. Output in Germany, which is the 20-nation bloc’s largest economy, declined by 2.7% from the previous month.

In addition, the euro has come under pressure due to political uncertainty in Germany.

The European Central Bank is expected to implement a 25 basis point interest rate cut at its December 12 policy meeting. There are expectations that the European Central Bank will lower its key interest rates more aggressively than the Federal Reserve, which I likely to put additional pressure on the euro.

STOCK INDEX FUTURES

Futures came under pressure when the bearish on balance U.S. October producer price index report was released.

Adriana Kugler of the Federal Reserve earlier today said if disinflation progress stalls the Federal Reserve could call for pausing interest rate cuts.

In addition to Federal Reserve Chair Powell, other Federal Reserve speakers today are Thomas Barkin at 8:00 and John Williams at 3:45.

Currently there is an 82% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its December 18 policy meeting, and there is an 18% chance that the FOMC will keep its key rate unchanged at 4.50% – 4.75%.

INTEREST RATE MARKET FUTURES

Stock index futures are mixed but are holding up well for today’s news.

The October producer price index increased 0.2% when up 0.2% was expected, and on an annualized basis increased 2.4% when a gain of 2.3% was anticipated.

Jobless claims in the week ended November 9 were 217,000 when 225,000 were forecast.

At 2:00 central time Federal Reserve Chair Jerome Powell will participate in the “Global Perspectives” conversation event hosted by the Dallas Regional Chamber, the World Affairs Council of DFW and the Federal Reserve Bank of Dallas. His economic outlook will be followed by a question and answer session.

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