Weak US Employment Signals Trigger Currency Volatility and Money Signs Shift Across Markets

The dollar index (DXY) faced selling pressure today, declining 0.13% as fresh signals of labor market deterioration fueled expectations for continued Federal Reserve rate cuts. The catalyst came from ADP’s employment report showing employers shed an average of 2,500 jobs per week over the four-week period ending November 1, a concerning trend that has reoriented rate-cut probabilities.

Employment Data Reshapes Fed Expectations

US initial jobless claims totaled 232,000 for the week ended October 18, while continuing claims jumped 10,000 to reach a 2-month high of 1.957 million. These figures paint a picture of deteriorating labor market conditions. Markets have responded by pricing in a 49% probability that the Federal Open Market Committee will reduce the fed funds target range by 25 basis points at the December 9-10 meeting.

The employment weakness contrasts sharply with some bright spots in housing data, where the NAHB housing market index unexpectedly surged to a 7-month high of 38 in November, up 1 point from expectations of 37. Factory orders also performed inline with predictions, rising 1.4% month-over-month.

Dollar Under Pressure as Euro Captures Upside

EUR/USD recovered from overnight declines and advanced 0.09% as the employment disappointment pressured the greenback. Central bank policy divergence is reinforcing euro strength—the European Central Bank appears largely done with its easing cycle, while the Federal Reserve signals multiple additional rate reductions are likely by end-of-2026. Market pricing currently assigns just a 4% probability to a 25 basis point ECB cut at the December 18 meeting.

Yen Rebounds on Safe-Haven and Rate Dynamics

USD/JPY declined 0.10% as the yen rebounded from a 9.5-month low against the dollar. Falling US Treasury yields triggered short covering in the yen, while a sharp 3% selloff in Japan’s Nikkei Stock Index bolstered safe-haven demand. The 10-year Japanese government bond yield reached a 17-year peak of 1.761%, supporting yen appreciation.

Bank of Japan Governor Ueda’s dovish comments initially weighed on the yen, with the BOJ chief noting the central bank is “gradually adjusting the degree of monetary easing.” However, concerns about Japan’s weak Q3 GDP and potential fiscal stimulus expansion ultimately provided underlying support. Markets now price a 28% chance of a BOJ rate hike at the December 19 policy meeting.

Precious Metals Face Mixed Signals

December COMEX gold contracts fell 16.60 points (-0.41%) to 1-week lows, while December COMEX silver declined 0.481 (-0.95%). The selloff reflects diminishing odds for a Federal Reserve rate cut in December following recent hawkish commentary from Fed officials. The probability of a rate cut at next month’s FOMC meeting initially fell to 48% from 70% earlier this month.

Yet ADP’s disappointing employment data cushioned precious metals’ losses by resurrecting rate-cut expectations to 48% from 40% on Monday. Gold and silver continue drawing support from multiple structural factors: uncertainty surrounding US tariff policies, ongoing geopolitical tensions, robust central bank purchasing patterns, and scrutiny over Fed independence.

China’s PBOC expanded gold reserves to 74.09 million troy ounces in October—marking twelve consecutive months of accumulation. Additionally, the World Gold Council reported global central banks acquired 220 metric tons of gold in Q3, representing a 28% increase from Q2. These purchases underscore the sustained institutional demand underpinning precious metals. However, long liquidation pressures that emerged following mid-October record highs continue to weigh on sentiment, with holdings in gold and silver ETFs recently declining from their October 21 three-year peaks.