The dollar index (DXY00) Monday rose by +0.32% and posted a 1-1/2 week high. Weakness in the euro Monday boosted the dollar after monthly Eurozone PMI reports missed expectations and hinted at a worsening slowdown in the Eurozone. The dollar extended its gains on Monday’s stronger-than-expected U.S. July S&P manufacturing activity report. Higher T-note yields on Monday also supported the dollar.
Monday’s U.S. economic news was mixed for the dollar. On the positive side, the Jul S&P manufacturing PMI unexpectedly rose +2.7 to 49.0, stronger than expectations of a decline to 46.2. Conversely, the Jun Chicago Fed activity index unexpectedly fell -0.4 to -0.32, weaker than expectations of an increase to -0.13.
EUR/USD (^EURUSD) Monday fell by -0.54% and posted a 1-1/2 week low. Economic concerns weighed on the euro after Monday’s Eurozone PMI reports were weaker than expected, a dovish factor for ECB policy. Also, political uncertainty in Spain is bearish for EUR/USD after Sunday’s undecisive election results may leave Spain facing months of instability without a fully functioning government.
The Eurozone Jul S&P manufacturing PMI unexpectedly fell -0.7 to 42.7, weaker than expectations of an increase to 43.5 and the steepest pace of contraction in more than three years. Also, the Jul S&P composite PMI fell -1.0 to an 8-month low of 48.9, weaker than expectations of 49.6.
USD/JPY (^USDJPY) on Monday fell by -0.20%. The yen Monday rose moderately against the dollar on reports that the BOJ at this Friday’s meeting will raise its consumer inflation projection to around 2.5% for the year ending in March, up from an April projection of 1.8%. The yen fell back from its best levels Monday as T-note yields rose.
Monday’s Japanese economic news was bearish for the yen after the Jul Jibun Bank manufacturing PMI fell -0.4 to a 4-month low of 49.4.
August gold (GCQ3) Monday closed down -4.4 (-0.22%), and Sep silver (SIU23) closed down -0.274 (-1.10%). Precious metals prices Monday settled moderately lower, with silver falling to a 1-week low. Monday’s rally in the dollar index to a 1-1/2 week high was bearish for metals prices. Also, expectations for the Fed and ECB to raise interest rates this week are undercutting metals prices. Silver prices also retreated on industrial metals demand concerns after the Eurozone Jul S&P manufacturing PMI contracted by the most in over three years. In addition, the liquidation by funds of their long gold positions continues to weigh on gold prices after long gold positions in ETFs fell to a 3-year low last Friday.
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.
