The dollar index (DXY00) today is down slightly by -0.07%. Strength in the British pound (^GBPUSD) is weighing on the dollar as GBP/USD rallied to a 2-1/3 year high today. However, higher T-note yields today are limiting losses in the dollar. Also, heightened geopolitical risks in the Middle East support safe-haven demand for the dollar. Today’s US economic news was mixed for the dollar.
June SP CoreLogic US composite-20 home price index growth eased to a 6-month low of +6.47% y/y from +6.88% y/y in May but was stronger than expectations of +6.14% y/y.
The Conference Board’s Aug US consumer confidence index rose +1.4 to a 6-month high of 103.3, stronger than expectations of 100.7.
The US Aug Richmond Fed manufacturing survey current conditions unexpectedly fell -2 to a 4-1/4 year low of -19 versus expectations of an increase to -14.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 27% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is trading slightly higher due to weakness in the dollar. The euro is also seeing support from today’s rise in the 10-year German bund yield to a 3-1/2 week high. Gains in the euro are limited after the German Sep GfK consumer confidence index unexpectedly fell to a 4-month low. Also, dovish ECB comments today undercut the euro after ECB Governing Council members Centeno and Knot said they favored easing of ECB monetary policy.
The German Sep GfK consumer confidence index unexpectedly fell -3.4 to a 4-month low of -22.0, weaker than expectations of an increase to -18.2.
ECB Governing Council member Centeno said the direction of monetary policy in the Eurozone seems "relatively clear" given indicators such as lower inflation.
ECB Governing Council member Knot said he favors gradual monetary easing so long as inflation stays on track to return to the ECB's 2% goal next year.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 96% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -0.17%. The yen today is slightly higher on safe-haven support from geopolitical tensions in the Middle East. Also, central bank policy divergence is favoring the yen as the BOJ is expected to keep raising interest rates while the Fed and ECB cut rates.
Japan July PPI services prices eased to +2.8% y/y from +3.1% y/y in June, weaker than expectations of +2.9% y/y.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and at +9% for the October 30-31 meeting.
December gold (GCZ24) today is down -8.6 (-0.34%), and September silver (SIU24) is down -0.122 (-0.41%). Precious metals today are posting moderate losses. Higher global bond yields today are undercutting precious metals. However, a weaker dollar today is limiting losses in metals. Also, dovish comments today from ECB Governing Council members Centeno and Knot supported demand for gold as a store of value when they said they favored ECB interest rate cuts. In addition, safe-haven demand for precious metals remains strong on escalation of Middle East tensions after Israel on Sunday launched airstrikes in southern Lebanon.
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.
