The dollar index (DXY00) Tuesday rose by +0.12%. The dollar Tuesday recovered from early losses and posted moderate gains on expectations for the Fed to raise interest rates by 25 bp at next week’s FOMC meeting. Also, weakness in the euro boosted the dollar as EUR/USD retreated on dovish comments from ECB Governing Council member Knot.
The dollar Tuesday initially moved lower on the weaker-than-expected Jun Retail sale and Jun manufacturing production reports. Also, lower T-note yields and a rally in stocks Tuesday undercut the dollar.
U.S. Jun retail sales rose +0.2% m/m, weaker than expectations of +0.5% m/m, and Jun retail sales ex-autos rose +0.2% m/m, weaker than expectations of +0.3% m/m.
U.S. Jun manufacturing production unexpectedly fell -0.3% m/m, weaker than expectations of no change.
The U.S. Jul NAHB housing market index rose +1 to a 13-month high of 56, right on expectations.
EUR/USD (^EURUSD) Tuesday fell by -0.09%. The euro Tuesday retreated from a 16-1/2 month high and posted modest losses. EUR/USD gave up its advance Tuesday and turned lower on dovish comments from ECB Governing Council member Knot who said monetary tightening beyond next week’s ECB meeting is anything but guaranteed. Also, a decline in the 10-year German 10-year bund yield Tuesday to a 2-week low weakened the euro’s interest rate differentials and undercut the euro.
ECB Governing Council member Knot pushed back on bets for a September ECB rate hike, saying that a rate hike by the ECB at its July meeting "is a necessity but for anything beyond July it would at most be a possibility but by no means a certainty."
USD/JPY (^USDJPY) on Tuesday rose by +0.21%. The yen on Tuesday gave up an early advance and moved lower on comments from BOJ Governor Ueda that signal the BOJ is not yet ready to end its overly easy monetary policy. Ueda said that a shift in the inflation outlook is needed to change the BOJ’s stance for persistent monetary easing.
The yen Tuesday initially moved moderately higher on lower T-note yields and better-than-expected Japanese economic news on the May tertiary index.
The Japan May tertiary industry index rose +1.2% m/m, stronger than expectations of +0.4% m/m.
August gold (GCQ3) Tuesday closed up +24.4 (+1.25%), and Sep silver (SIU23) closed up +0.238 (+0.98%). Precious metals prices Tuesday posted moderate gains, with gold climbing to a 5-week high and silver posting a 2-1/4 month high. A decline in global government bond yields Tuesday supported precious metals. Also, dovish comments from ECB Governing Council member Knot boosted metals when he said any ECB monetary tightening after next week’s meeting is not guaranteed. A stronger dollar and a rally in stocks Tuesday curbed the safe-haven demand for precious metals.
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