The dollar index (DXY00) today is down by -0.25%. The dollar today is moderately lower due to the strength of the euro. Losses in the dollar accelerated after the US Jun ISM manufacturing index and May construction spending unexpectedly declined. Dollar losses are limited due to higher bond yields and weakness in the yen, which tumbled to a new 37-year low against the dollar today.
The US Jun ISM manufacturing index unexpectedly fell 0.2 to a 4-month low of 48.5, weaker than expectations of an increase to 49.1. The Jun ISM price paid sub-index fell -4.9 to a 6-month low of 52.1, weaker than expectations of 55.9.
US May construction spending unexpectedly fell -0.1% m/m versus expectations of +0.2% m/m.
The markets are discounting the chances for a -25 bp rate cut at 9% for the July 30-31 FOMC meeting and 60% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) today is up by +0.30% and posted a 2-week high. The euro strengthened today after the first round of French parliamentary elections on Sunday showed Marine Le Pen’s far-right party winning by a smaller margin than was expected, which reduces the probability that the far-right party will achieve an absolute majority that would allow it to implement extreme policies. The euro fell back from its best levels after German Jun consumer prices eased, a dovish factor for ECB policy.
The Eurozone Jun S&P manufacturing PMI was revised upward by 0.2 to 45.8 from the previously reported 45.6.
German Jun CPI (EU harmonized) eased to +2.5% y/y from +2.8% y/y in May, right on expectations.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 8% for the July 18 meeting and 62% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.31%. The yen today fell to a fresh 37-year low against the dollar. The yen came under pressure today after the Japan Jun Jibun Bank manufacturing PMI was revised lower. Also, rising T-note yields today weighed on the yen. Losses in the yen are limited by concerns that with today’s new 37-year low, Japanese authorities could intervene in the forex market at any time to support the yen.
The Japan Jun consumer confidence index rose +0.2 to 36.4, right on expectations.
The Japan Q2 Tankan large manufacturing business conditions rose +2 to 13, stronger than expectations of no change at 11.
The Japan Jun Jibun Bank manufacturing PMI was revised down to 50.0 from the previously reported 50.1.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 61% for the July 31 meeting and 55% for the September 20 meeting.
August gold (GCQ4) today is up +2.40 (+0.10%), and September silver (SIU24) is up +0.125 (+0.42%). Precious metals recovered from early losses today and moved slightly higher. Weakness in the dollar today is bullish for metals. Also, an increase in US inflation expectations supports gold demand as an inflation hedge after the 10-year breakeven inflation rate rose to a 3-week high today. In addition, ongoing Middle East tensions are boosting the safe-haven demand for precious metals.
On the negative side is an easing of French political uncertainty that has curbed safe-haven demand for gold today after Marine Le Pen’s far-right party won the first round of French parliamentary elections on Sunday by a smaller-than-expected margin. Also, higher global bond yields today are bearish for precious metals. Gains in silver were limited after the US Jun ISM manufacturing index and May construction spending unexpectedly declined, which are bearish factors for industrial metals demand.
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.
