The dollar index (DXY00) today is down by -0.19%. The dollar is lower as T-note yields declined on the weaker-than-expected US Jul PPI report, which bolstered the chances for a Fed rate cut at the September FOMC meeting. Today’s rally in stocks has also reduced liquidity demand for the dollar.
US July PPI final demand eased to +2.2% y/y from +2.7% y/y in June, a smaller increase than expectations of +2.3% y/y. Also, July PPI ex-food and energy eased to +2.4% y/y from +3.0% y/y in June, better than expectations of +2.6% y/y.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 59% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up by +0.22% at a 1-week high. Dollar weakness today is providing support to the euro. However, the euro was undercut after the German August ZEW investor confidence survey fell more than expected to a 7-month low.
The German Aug ZEW expectation of economic growth survey fell -22.6 to a 7-month low of 19.2, weaker than expectations of 34.0.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 99% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -0.14%. Japanese economic news today supported the yen after July machine tool orders rose for a third month, and after July PPI rose at the fastest pace in 11 months, a hawkish factor for BOJ policy. The yen extended its gains against the dollar today after T-note yields fell. However, today’s +3% surge in the Nikkei Stock Index to a 1-week high reduced safe-haven demand for the yen.
Japan July machine tool orders rose +8.4% y/y, the third consecutive month orders increased.
Japan's July PPI rose +3.0% y/y, the largest increase in 11 months.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and +8% for the October 30-31 meeting.
December gold (GCZ24) today is up +7.30 (+0.29%), and September silver (SIU24) is down -0.298 (-1.06%). Gold and silver prices today are mixed, with gold climbing to a 1-week high. Today’s dollar weakness is supportive of metals prices. Also, lower global bond yields today are bullish for precious metals prices. In addition, safe-haven demand for precious metals has strengthened as an attack by Iran on Israel may be imminent in retaliation for the recent assassination of a Hamas political leader in Tehran.
Today's gains in precious metals prices are limited as strength in equity markets has curbed some safe-haven demand for precious metals. Also, concerns about China’s economy are undercutting industrial metals demand and silver prices.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
