Maxco Futures — The U.S. Dollar Index (DXY) weakened sharply on Wednesday, falling 0.50% to its lowest level in five weeks after the ADP Employment report showed a significant deterioration in labor market conditions. The data reported a decline of 32,000 jobs in November, the largest contraction in more than two and a half years, fueling stronger speculation that the Federal Reserve will cut interest rates at the upcoming FOMC meeting on December 9–10. The probability of a 25-basis-point cut has now surged to 95%, sharply higher than just two weeks ago when it stood at 30%.
A surprising increase in the ISM Services Index to 52.6, the highest in nine months, failed to support the dollar. Market participants remained focused on labor-market weakness, which is viewed as a more accurate gauge of short-term monetary policy direction.
Dollar sentiment was also weighed down by political factors. President Donald Trump indicated that the announcement of the next Federal Reserve Chair will be made in early 2026. Markets see Kevin Hassett, Director of the NEC, as the leading candidate to replace Jerome Powell. Given Hassett’s well-known dovish stance, such a transition is expected to exert additional downward pressure on the dollar and raise renewed concerns over central-bank independence.
U.S. domestic economic data also showed weakness, with MBA mortgage applications falling 1.4%, and refinancing slipping 4.4%, despite the 30-year mortgage rate dropping to 6.32%. Meanwhile, September manufacturing output was flat, in line with expectations.
Euro Strengthens on Positive PMI Revision
The euro strengthened 0.40%, reaching a six-week high amid broad dollar weakness and an upward revision to the Eurozone composite PMI. November’s reading was revised to 52.8, the highest level in 2.5 years, indicating improving economic momentum in the region. With the ECB widely expected to have completed its easing cycle while the Fed is still seen leaning toward additional rate cuts, this policy divergence has become a strong catalyst for euro appreciation. Markets now assign only a 1% probability of an ECB rate cut at the December 18 meeting.
Yen Firms as JGB Yields Rise
USD/JPY fell 0.45%, with the yen strengthening on the back of rising Japanese government bond yields. The 10-year JGB yield climbed to 1.897%, the highest in 17 years, improving the rate differential and boosting demand for the yen. Further support came from declining U.S. Treasury yields following the softer-than-expected ADP report. Markets now see an 81% probability that the BOJ will hike rates on December 19 — a move that would mark the most aggressive shift in Japanese monetary policy in more than a decade.
Gold Gains While Silver Pulls Back on Profit-Taking
February gold futures closed 0.28% higher, supported by dollar weakness and expectations of imminent Fed policy easing. Safe-haven demand remains firm, driven by uncertainty surrounding U.S. tariff policy and global geopolitical risks.
Meanwhile, March silver futures slipped 0.14% due to late-session profit-taking, after the front-month contract briefly touched a record high of $58.90 per troy ounce. Despite the pullback, silver remains fundamentally supported by supply concerns, with inventories at the Shanghai Futures Exchange dropping to 519 tons, the lowest level in a decade.
Central-bank demand continues to underpin the precious-metals market. China increased its gold reserves to 74.09 million ounces, marking the 12th consecutive month of purchases. World Gold Council data shows global central-bank gold buying reached 220 metric tons in the third quarter, up 28% from the previous quarter. While gold ETFs have seen outflows since mid-October due to profit-taking from three-year highs, silver ETFs have rebounded, with long positions hitting a 3.25-year high.
DXY Technical Outlook
Technically, the U.S. Dollar Index still shows potential for further downside, with the next support levels at:
- 98.60
- 98.00 (key medium-term support)
Major resistance remains at 100.44, while intraday resistance levels are seen at:
- 99.60
- 99.82
- 99.98
Dollar pressure is likely to persist as markets remain focused on Fed easing prospects and evident labor-market softening. Meanwhile, global policy divergence — with the ECB holding steady and the BOJ signaling normalization — continues to drive volatility across major currency pairs. Precious metals remain key beneficiaries of monetary-policy uncertainty and geopolitical risk, although volatility remains elevated following last month’s aggressive rally.
Ade Yunus, ST WPA
Global Market Strategies