Fed Chair Speculation Triggers Dollar Weakness—Here's What's Moving Markets

The dollar caught a bid early Wednesday before reversing course, ultimately closing down 0.08%. While headline jobs data came in stronger than expected—unemployment claims dropped to 216K (a 7-month low)—and capital goods orders exceeded forecasts, these wins were overshadowed by a slump in manufacturing sentiment.

The Dove Factor

Bloomberg’s report that Kevin Hassett tops the list for Fed Chair replacement lit a fuse under commodities. The market read him as dovish and Trump-aligned, raising questions about Fed independence. Result? Gold surged 0.61% to a 1.5-week high, silver jumped 3.83%. The 80% odds now priced into a December rate cut are music to precious metals’ ears.

Manufacturing Stalls Hard

Nov Chicago PMI plummeted to 36.3—a 17-month contraction low—missing expectations of 43.6 by a mile. That’s the real gut-punch to dollar demand. The Beige Book offered a mixed read: some contacts see slower activity ahead, though manufacturers remain cautiously optimistic.

Currency Moves

EUR/USD climbed 0.23% to 1-week highs after ECB’s Vujcic signaled rates are “in a good place for now.” Russia-Ukraine peace uncertainty is capping upside.

USD/JPY added 0.24% as the Nikkei rallied 1.85%—safe-haven demand for yen weakened. Japan’s Oct machine tool orders beat, revised to +17.1% y/y (3-year high), but easing PPI services (+2.7% y/y) hints the BOJ isn’t rushing to hike despite 34% odds priced in for December.

The Metals Narrative

Central bank buying remains relentless: China’s PBOC gold reserves hit 74.09M troy ounces (12th straight month of accumulation). Global central banks bought 220 MT in Q3, up 28% from Q2. Meanwhile, Shanghai silver warehouses hit a 10-year low—supply tightness is a silver wildcard.

The headwind? Stock strength sapped safe-haven flows and broader liquidity demand for dollars.

Bottom line: Dovish Fed-speak + weak manufacturing = dollar under pressure, commodities bid. Watch December 9-10 for the FOMC call.