The dollar index (DXY00) today is up by +0.13%. The dollar today recovered from a 3-week low and is moderately higher on weakness in the euro and British pound. The euro fell to a 4-week low on dovish ECB comments, and the British pound fell to a 3-1/2 week low after the BOE cut interest rates.
Gains in the dollar are contained due to today’s stock rally, which curbs liquidity demand for the dollar. Also, today’s Fed-friendly US economic reports on weekly initial unemployment claims, Q2 nonfarm productivity, and the Jul ISM manufacturing index knocked the 10-year T-note down to a 6-month low and weighed on the dollar. The dollar also has a negative carryover from Wednesday when Fed Chair Powell said a Fed rate cut "could be" on the table at the September FOMC meeting.
US weekly initial unemployment claims rose +14,000 to a nearly 1-year high of 249,000, showing a weaker labor market than expectations of 236,000. Weekly continuing claims rose +33,000 to a 2-1/2 year high of 1.877 million, showing a weaker labor market than expectations of 1.855 million.
US Q2 nonfarm productivity rose +2.3%, stronger than expectations of +1.8%. Q2 unit labor costs rose +0.9%, weaker than expectations of +1.7%.
The US Jul ISM manufacturing index unexpectedly fell -1.7 to 46.88, weaker than expectations of an increase to 48.8 and the steepest pace of contraction in 8 months.
US Jun construction spending unexpectedly fell -0.3% m/m, weaker than expectations of an increase of +0.2% m/m.
The markets are discounting the chances for a -25 bp rate cut at 100% for the Sep 17-18 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.26% at a 4-week low. Dollar strength today is undercutting the euro. Also, today’s economic news showed the Eurozone Jun unemployment rate unexpectedly increased, indicating labor market weakness that is dovish for ECB policy. The euro fell to its lows today on dovish comments from ECB Governing Council member Stournaras who said the ECB may cut interest rates twice more this year to aid the struggling Eurozone economy.
The Eurozone Jun unemployment rate unexpectedly rose +0.1 to 6.5%, showing a weaker labor market than expectations of no change at 6.4%.
The Eurozone Jul S&P manufacturing PMI was revised upward by +0.2 to 45.8 from the previously reported 45.6.
ECB Governing Council member Stournaras said, "I still expect two more ECB rate cuts this year if disinflation continues as expected. Also, growth is weaker than expected, which also speaks in favor of interest rate cuts."
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.16%. The yen today fell back from a 4-1/2 month high against the dollar as the yen consolidated some of its sharp 3-week-long rally. Also, today’s downward revision to the Japan Jul Jibun Bank manufacturing PMI sparked long liquidation in the yen. Losses in the yen are limited after the 10-year T-note yield fell to a 6-month low.
The yen today initially extended Wednesday’s rally to a 4-1/2 month high on positive carryover from Wednesday when the BOJ unexpectedly raised its benchmark interest rate to 0.25% from a range of 0% to 0.1%. The BOJ also said it would reduce its monthly pace of bond purchases to around 3 trillion yen ($19.9 billion) by the first quarter of 2026 from 5.7 trillion yen in July.
The Japan Jul Jibun Bank manufacturing PMI was revised downward by -0.1 to 49.1 from the previously reported 49.2.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 14% for the September 20 meeting.
December gold (GCZ24) today is up +20.40 (+0.82%), and September silver (SIU24) is down -0.013 (-0.04%). Precious metals today are moderately higher, with gold posting a 2-week high. Escalating geopolitical risks in the Middle East have spurred safe-haven buying of precious metals after Iran’s leader Ayatollah Ali Khamenei ordered a strike on Israel in response to the assassination of the political leader of Hamas in Tehran. Precious metals also have carryover support from Wednesday when Fed Chair Powell said a Fed rate cut "could be" on the table at the September FOMC meeting. In addition, a slide in global bond yields is bullish for precious metals. Finally, today’s action by the BOE to cut interest rates supports gold demand as a store of value.
On the bearish side, today’s rally in stocks has reduced some safe-haven appeal of precious metals. Also, silver prices gave up an early advance and turned lower after the US Jul ISM manufacturing index unexpectedly contracted by the most in 8 months and the China Jul Caixin manufacturing PMI contracted by the most in 9 months, negative factors for industrial metals demand.
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.
