The dollar index (DXY00) Wednesday fell by -0.32%. The dollar fell back Wednesday on lower T-note yields. The dollar was weighed down by Wednesday’s weaker-than-expected U.S. Jun new home sales report. The dollar sank to its low Wednesday afternoon when Fed Chair Powell said the Fed would remain data-dependent on future rate moves, leaving open the possibility of a pause at the September FOMC meeting.
U.S. Jun new home sales fell -2.5% m/m to 697,000, weaker than expectations of 725,000.
The FOMC, as expected, voted unanimously to raise the fed funds target range by 25 bp to 5.25%-5.50% and said it "will continue to assess additional information and its implications for monetary policy and consider the extent of additional policy firming that may be appropriate to return inflation to 2% over time."
Fed Chair Powell said the FOMC will take a data-dependent approach to future interest rate hikes, and it's possible the FOMC will raise or hold rates at its September meeting, depending on the data.
EUR/USD (^EURUSD) Wednesday rose by +0.34%. Dollar weakness Wednesday sparked short covering in the euro. Also, the smallest pace of increase in the Eurozone Jun M3 money supply in 13 years is bullish for the euro. In addition, higher German bund yields on Wednesday strengthened the euro’s interest rate differentials and were positive for EUR/USD.
Eurozone Jun M3 money supply rose +0.6% y/y, less than expectations of +0.9% y/y and the smallest pace of increase in nearly 13 years.
USD/JPY (^USDJPY) on Wednesday fell by -0.55%. The yen on Wednesday found support on a decline in T-note yields. Also, short covering supported the yen ahead of Friday’s BOJ meeting as traders covered short positions in the yen just in case the BOJ surprises the markets and decides to tweak its yield-curve-control program.
Wednesday’s Japanese economic news was dovish for BOJ policy and bearish for the yen. The May leading index CI was revised lower to 109.2 from the initially reported 109.5. Also, Jun PPI services prices eased to +1.2% y/y from +1.7% y/y in May, better than expectations of +1.5% y/y and the slowest pace of increase in 15 months.
August gold (GCQ3) Wednesday closed up +6.4 (+0.33%), and Sep silver (SIU23) closed up +0.146 (+0.59%). Precious metals prices Wednesday posted moderate gains. Dollar weakness on Wednesday was bullish for metals prices. Also, a decline in T-note yields was bullish for precious metals. Gold prices extended their gains Wednesday afternoon in post-market trading as the dollar weakened further on comments from Fed Chair Powell, who said the Fed hadn’t made a decision to hike at every other meeting, sparking speculation the Fed will skip a rate hike at the next FOMC meeting in September.
Gains in gold were limited Wednesday on the outlook for the ECB to raise interest rates by 25 bp at Thursday’s policy meeting. Also, fund liquidation of long gold positions is weighing on gold prices after long gold holdings in ETFs fell to a 3-year low Tuesday.
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.
