The dollar index (DXY00) today posted a 5-week low and is trading slightly lower. Today’s strength in stocks has reduced liquidity demand for the dollar. Losses in the dollar are limited by higher T-note yields. The dollar also has support from increased safe-haven demand after the attempted assassination of former president Donald Trump on Saturday.
Today’s US economic news supported the dollar after the July Empire manufacturing survey of general business conditions index fell -0.6 to -6.6, stronger than expectations of -7.6.
The markets are discounting the chances for a -25 bp rate cut at 7% for the July 30-31 FOMC meeting and 95% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) today is up by +0.07% and posted a 3-3/4 month high. A weaker dollar today is supportive of the euro. The euro also found support from news that Eurozone May industrial production fell less than expected.
Eurozone May industrial production fell -0.6% m/m, the biggest decline in 4 months but better than expectations of -0.7% m/m.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 4% for the July 18 meeting and 80% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.04%. The yen is under pressure from higher T-note yields. However, the yen has support from concern that any additional weakness in the yen will prompt Japanese authorities to intervene again in the forex market in support of the yen following last Thursday’s intervention.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 50% for the July 31 meeting and 28% for the September 20 meeting.
August gold (GCQ24) today is up +5.6 (+0.23%), and September silver (SIU24) is down -0.087 (-0.28%). Precious metals prices today are mixed. A weaker dollar today is supportive of precious metals. Also, Saturday’s attempted assassination of former president Trump sparked safe-haven buying of precious metals.
Gold has support from fund buying after long gold holdings in ETFs rose to a 3-month high last Friday. In addition, gold has support as an inflation hedge after the chances of former president Trump winning the election in November increased, which could boost inflation if he pursues new tax cuts and stimulative fiscal policies.
Higher global bond yields today are limiting the upside for precious metals. Also, strength in stocks today has curbed some safe-haven demand for precious metals. Silver prices are weighed down by weak Chinese economic reports, which were negative for industrial metals demand.
China's Q2 GDP rose +0.6% q/q and +5.0% y/y, weaker than expectations of +0.9% q/q and +5.2% y/y. Also, China Jun retail sales rose +2.0% y/y weaker than expectations of +3.4% y/y and the smallest pace of increase in 14 months. In addition, China June new home prices fell -0.67% m/m, the thirteenth consecutive month home prices have declined.
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.
