The dollar index (DXY00) Tuesday rose by +0.02%. The dollar Tuesday recovered from early losses and posted modest gains. The dollar Tuesday erased losses and tracked T-note yields higher on hawkish comments from Minneapolis Fed President Kashkari, who said he's "not ready to say that we're done" raising interest rates." Also, the weakness in stocks Tuesday boosted the liquidity demand for the dollar.
Tuesday’s U.S. economic news was mixed for the dollar. On the positive side, Jul retail sales rose +0.7% m/m, stronger than expectations of +0.4% m/m. Also, the Jul import price index ex-petroleum was unchanged m/m, stronger than expectations of -0.2% m/m. On the negative side, the Aug Empire manufacturing survey general business conditions fell -20.1 to -19.0, weaker than expectations of -1.0. Also, the Aug NAHB housing market index unexpectedly fell -6 to 50, weaker than expectations of no change at 56.
Comments Tuesday from Minneapolis Fed President Kashkari were hawkish for Fed policy and supportive of the dollar when he "We've made some good progress on inflation," but the rate "is still too high." He added that he's "not ready to say that we're done" raising interest rates, and we're "a long way away from cutting interest rates."
EUR/USD (^EURUSD) Tuesday fell by -0.04%. The euro Tuesday gave up an early advance and turned lower after hawkish comments from Minneapolis Fed President Kashkari sparked short covering in the dollar. EUR/USD Tuesday initially moved higher after the 10-year German bund yield rose to a 5-1/4 month high and after the German Aug ZEW expectations of economic growth unexpectedly rose.
The German Aug ZEW expectations of economic growth unexpectedly rose +2.4 to -12.3, stronger than expectations of a decline to -14.9.
USD/JPY (^USDJPY) on Tuesday rose by +0.03%. The yen Tuesday gave up an early advance and dropped to a new 9-month against the dollar. Higher T-note yields Tuesday weighed on the yen. The yen Tuesday initially moved higher on economic news that showed Japan's Q2 GDP grew more than expected and Japan’s Jun industrial production rose more than expected. Also, short covering in the yen emerged after comments from Japanese Finance Minister Suzuki bolstered speculation the BOJ was close to intervening in the forex market to prop up the yen when he said he would take appropriate action if authorities deemed movements in the foreign currency market were excessive.
Japan Q2 GDP grew +6.0% (q/q annualized), stronger than expectations of +2.9% and the strongest pace of expansion since Q4 2020. The Q2 deflator rose +3.4% y/y, the highest since the data series began in 1995.
Japan Jun industrial production was revised upward by +0.4 to +2.4% m/m from the initially reported +2.0% m/m, the largest increase in 4 months.
October gold (GCV3) Tuesday closed down -8.7 (-0.45%), and Sep silver (SIU23) closed down -0.052 (-0.23%). Precious metals prices Tuesday closed moderately lower, with gold and silver falling to 7-week lows. Higher global bond yields on Tuesday weighed on precious metal prices. Also, weaker-than-expected Chinese economic news on industrial production was bearish for industrial metals demand and weighed on silver prices. In addition, fund liquidation in gold continues after long gold holdings in ETFs fell to a 3-1/3 year low Monday. A weaker dollar Tuesday and a slump in stocks limited losses in metals.
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.
