The dollar index (DXY00) Tuesday rose by +0.13%. Hawkish comments today from Fed Governor Bowman boosted the dollar when she said she sees a number of upside risks to the inflation outlook, and "we are still not yet at the point where it is appropriate to lower the policy rate." Also, stronger-than-expected US home prices and consumer confidence reports were hawkish for Fed policy and bullish for the dollar. The dollar fell back from its best levels Tuesday after Fed Governor Cook said it would be appropriate for the Fed to reduce interest rates "at some point."
The Conference Board US June consumer confidence index fell -0.9 to 100.4, slightly stronger than expectations of 100.0.
The US Apr S&P CoreLogic composite-20 home price index eased to +7.20% y/y from +7.46% y/y in March, stronger than expectations of +7.00% y/y.
The US June Richmond Fed manufacturing survey fell -10 to -10, weaker than expectations of -3.
The US June Chicago Fed national activity index unexpectedly rose +0.44 to 0.18, stronger than expectations of a decline to -0.25.
Fed Governor Bowman said she sees a number of upside risks to the inflation outlook, and "we are still not yet at the point where it is appropriate to lower the policy rate." She added that she "doesn't see any rate cuts by the Fed this year and shifted her outlook for rate cuts to 2025."
Fed Governor Cook said it will be appropriate for the Fed to reduce interest rates "at some point," but "the timing of any such adjustment will depend on how economic data evolve and what they imply for the economic outlook and balance of risks."
The markets are discounting the chances for a -25 bp rate cut at 10% for the July 30-31 FOMC meeting and 65% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) Tuesday fell by -0.15%. A stronger dollar Tuesday weighed on the euro. The euro is also under pressure after a Bloomberg “poll of polls” shows Marine Le Pen's far-right National Rally party has widened its lead by 0.7 points to 35.4% ahead of the first round of France's snap legislative election on Sunday.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 6% for the July 18 meeting and 71% for the September 12 meeting.
USD/JPY (^USDJPY) Tuesday rose by +0.01%. The yen Tuesday gave up an early advance and turned slightly lower after hawkish comments from Fed Governor Bowman pushed T-note yields higher. The yen was also under pressure after Japan's May PPI services prices unexpectedly eased and the Japan Apr leading index CI was revised downward, dovish factors for BOJ policy. The yen found some support from Tuesday’s rise in the 10-year JGB bond yield to a 1-1/2 week high of 1.006%.
Japan May PPI services prices unexpectedly eased to +2.5% y/y from +2.7% y/y in Apr, weaker than expectations of an increase to +3.0% y/y.
The Japan Apr leading index CI was revised downward to 110.9 from the previously reported 111.6.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 54% for the July 31 meeting and 59% for the September 20 meeting.
August gold (GCQ4) Tuesday closed down -13.60 (-0.58%), and July silver (SIN24) closed down -0.657 (-2.23%). Precious metals Tuesday posted moderate losses, with silver falling to a 1-1/2 week low. Tuesday’s stronger dollar undercut metals prices. Also, hawkish comments Tuesday from Fed Governor Bowman weighed on precious metals when she said that she "doesn't see any rate cuts by the Fed this year.” In addition, a fall in inflation expectations curbs demand for precious metals as an inflation hedge after the 10-year breakeven inflation rate Tuesday fell to a 1-week low. Silver prices had a negative carryover on Tuesday from a slide in copper prices to a 2-month low.
Precious metals have underlying support Tuesday from increased safe-haven demand from political uncertainty in France after a Bloomberg poll of polls shows Marine Le Pen's far-right National Rally party has widened its lead by 0.7 to 35.4% ahead of the first round of France's snap legislative election on Sunday.
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.
