The dollar index (DXY00) today is up by +0.14%. The dollar is seeing support from hawkish comments on Saturday from Fed Governor Bowman, which pushed T-note yields higher. The yen is seeing weakness after a former BOJ member said the BOJ won't be able to raise interest rates again this year.
On Saturday, Fed Governor Bowman said, "The progress in lowering inflation during May and June is a welcome development, but inflation is still uncomfortably above the FOMC's 2% goal."
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 51% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up +0.03%. Higher 10-year German bund yields today are supporting modest gains in the euro. However, gains in EUR/USD are contained on concern that today’s rally in European nat-gas prices to an 8-month high may weigh on Eurozone economic prospects and undercut the euro.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 94% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.88%. The yen is under pressure today due to dovish comments from former BOJ board member Sakurai, who said the BOJ won’t raise interest rates again this year due to financial market turmoil. Also, higher T-note yields today are undercutting the yen.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and +11% for the October 30-31 meeting.
December gold (GCZ24) today is up +14.30 (+0.58%), and September silver (SIU24) is up +0.122 (+0.44%). Gold and silver prices today are moderately higher and posted 1-week highs. Short covering ahead of US producer and consumer price reports on Tuesday and Wednesday is boosting precious metals prices. Also, dovish comments today from former BOJ board member Sakurai sparked demand for gold as a store of value when he said the BOJ won’t be able to raise interest rates again this year due to financial market turmoil. In addition, geopolitical risks in the Middle East are supportive of safe-haven demand for precious metals as Iran vowed a retaliatory strike against Israel in response to the recent assassination of a Hamas political leader in Tehran.
Today’s strength in the dollar is bearish for metals. Also, hawkish comments from Fed Governor Bowman on Saturday were bearish for precious metals as they suggest she does not yet favor the Fed cutting interest rates when she said, “inflation is still uncomfortably above the FOMC's 2% goal." Strength in stocks today has also curbed some safe-haven demand for precious metals.
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.
