The dollar index (DXY00) today is up by +0.10%. The dollar today is slightly higher, supported by reduced speculation about a 50 bp rate cut by the Fed. The swap markets are discounting the chances for a 50 bp rate cut at next week’s FOMC meeting at 29%, down from 50% after the release of last Friday’s US payroll report. Strength in stocks today has reduced liquidity demand for the dollar and is limiting the dollar’s gains.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 29% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is down by -0.14%. Strength in the dollar today is weighing on the euro. The euro is also under pressure on expectations that the ECB will cut interest rates by 25 bp at Thursday’s policy meeting.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -0.13%. The yen rose today on a report from Bloomberg that said BOJ officials see little need to raise interest rates at next week's policy meeting, as they're still monitoring lingering volatility in financial markets and the impact of the July hike. Gains in the yen were limited after today’s news that Japan’s Aug machine tool orders fell by the most in four months.
Japan Aug machine tool orders fell -3.5% y/y, the biggest decline in 4 months.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and at +14% for the October 30-31 meeting.
December gold (GCZ24) today is up +1.9 (+0.08%), and December silver (SIZ24) is down -0.131 (-0.46%). Precious metals today are mixed. Expectations for the ECB to cut interest rates by 25 bp at Thursday’s policy meeting are bullish for precious metals. Gold is also seeing support from a Bloomberg report today said BOJ policymakers see little need to raise interest rates at next week’s BOJ meeting. Silver garnered support from today’s news that China’s Aug exports rose +8.7% y/y, stronger than expectations of +6.6% y/y and the largest increase in 17 months, a positive factor for global growth and industrial metals demand.
Strength in the dollar today is bearish for precious metals. Also, strength in stocks today has curbed safe-haven demand for precious metals. In addition, a decline in inflation expectations has reduced demand for gold as an inflation hedge after the US 10-year breakeven inflation rate fell to a 5-week low today of 2.027%.
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.
