The dollar index (DXY00) on Wednesday fell by -0.16%. The dollar Wednesday retreated from a 2-1/2 month high and posted moderate losses after economic news showed the U.S. Aug S&P manufacturing PMI fell more than expected, bolstering speculation the Fed will pause its rate hike campaign. A rally in stocks Wednesday also curbed liquidity demand for the dollar.
U.S. economic news Wednesday was mixed for the dollar. On the negative side, the Aug S&P manufacturing PMI fell -2.0 to 47.0, weaker than expectations of no change at 49.0. Conversely, July new home sales rose +4.4% m/m to a 1-1/2 year high of 714,000, stronger than expectations of +703,000.
EUR/USD (^EURUSD) on Wednesday rose by +0.14%. The euro on Wednesday recovered from a 2-1/4 month low and rose moderately. Short covering emerged in the euro Wednesday after the dollar shed early gains and turned lower. EUR/USD also found support after the Eurozone Aug S&P manufacturing PMI rose more than expected. The euro initially moved lower Wednesday after the Eurozone Aug S&P composite PMI contracted by the most in 2-3/4 years, which knocked the 10-year German bund yield down to a 1-1/2 week low and undercut the euro.
Eurozone economic news Wednesday was mixed for EUR/USD. On the bullish side, the Eurozone Aug S&P manufacturing PMI rose +1.0 to 43.7, stronger than expectations of no change at 42.7. Conversely, the Aug S&P composite PMI fell -1.6 to 47.0, weaker than expectations of -0.1 to 48.5 and the steepest pace of contraction in 2-3/4 years. Also, the Eurozone Aug consumer confidence indicator unexpectedly fell -0.9 to -16.0, weaker than expectations of an increase to -14.5.
USD/JPY (^USDJPY) on Wednesday fell by -0.70%. The yen on Wednesday rallied to a 1-1/2 week high against the dollar. The yen found support after the 10-year JGB government bond yield climbed to a 9-1/2 year high at 0.680%, strengthening the yen’s interest rate differentials. Gains in the yen accelerated after T-note yields tumbled on weak U.S. economic news.
Wednesday’s Japanese economic news was bullish for the yen after the Japan Aug Jibun Bank manufacturing PMI rose +0.1 to 49.7.
October gold (GCV3) Wednesday closed up +21.8 (+1.14%), and Sep silver (SIU23) closed up +0.942 (+4.02%). Precious metals prices Wednesday rallied sharply, with gold climbing to a 1-1/2 week high and silver jumping to a 3-week high. A weaker dollar Wednesday was bullish for metals prices. Precious metals also rallied Wednesday after weakness in U.S. and Eurozone economic news knocked bond yields lower, fueling speculation the Fed and ECB may refrain from further tightening monetary policy. Silver prices also found support on a jump in U.S. Jul new home sales to a 1-1/2 year high, signaling strong demand for industrial 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.
