The dollar index (DXY00) today fell to a 1-week low and is down by -0.02%. The dollar weakened today after US Aug nonfarm payrolls rose less than expected and July payrolls were revised lower. Also, dovish comments from New York Fed President Williams weighed on the dollar when he said it is now appropriate for the Fed to start cutting interest rates.
The dollar recovered from its worst levels as short covering emerged when T-note yields rebounded from early losses. The dollar also garnered support from today’s news that Aug average hourly earnings rose more than expected, a hawkish factor for Fed policy.
US Aug nonfarm payrolls rose +142,000, weaker than expectations of +165,000. Also, July nonfarm payrolls were revised lower to +89,000 from the previously reported +114,000. The Aug unemployment rate fell -0.1 to 4.2%, right on expectations.
US Aug average hourly earnings rose +0.4% m/m and +3.8% y/y, slightly stronger than expectations of +0.3% m/m and +3.7% y/y.
New York Fed President Williams said, "With the economy now in equipoise and inflation on a path to 2%, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate."
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 41% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today fell back from a 1-week high and is down by -0.18%. A recovery in the dollar today is undercutting the euro. Also, Eurozone economic news was weaker than expected and weighed on the euro after Eurozone Q2 GDP was revised lower, and German and French July industrial production fell more than expected.
Eurozone Q2 GDP was revised lower to +0.2% q/q from the previously reported +0.3% q/q.
German July industrial production fell -2.4% m/m, weaker than expectations of -0.5% m/m.
France July industrial production fell -0.5% m/m, weaker than expectations of -0.3% m/m.
German trade data was better than expected after July exports rose +1.7% m/m, stronger than expectations of +1.1% m/m. Also, July imports rose +5.4% m/m, stronger than expectations of +0.7% m/m and the most in 3-1/4 years.
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 -0.48%. The yen today climbed to a new 1-month high against the dollar after US monthly payrolls rose less than expected, which is dovish for Fed policy. Also, today’s drop in the Nikkei Stock Index to a 3-week low boosted some safe-haven demand for the yen. Gains in the yen were limited after today’s news that Japan’s July household spending rose less than expected.
The Japan July leading index CI rose +0.4 to 109.5, stronger than expectations of 109.4.
Japan July household spending rose +0.1% y/y, weaker than expectations of +1.2% 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 +14% for the October 30-31 meeting.
December gold (GCZ24) today is down -5.9 (-0.23%), and December silver (SIZ24) is down -0.159 (-0.55%). Precious metals today gave up an early advance and turned lower after the dollar index recovered from a 1-week low and traded little changed. Also, signs of sticky wage pressures were hawkish for Fed policy and bearish for gold after US Aug average hourly earnings rose more than expected. Silver prices were undercut today after Eurozone Q2 GDP was revised lower, and German and French July industrial production fell more than expected, which were negative factors for industrial metals demand.
Precious metals today initially moved higher after the dollar and T-note yields declined on signs of weakness in the US labor market when Aug nonfarm payrolls rose less than expected, and July was revised lower. Also, dovish comments today from New York Fed President Williams were supportive of precious metals when he said it is now appropriate for the Fed to start cutting interest rates.
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.
