The dollar index (DXY00) Monday rose by +0.22%. The dollar Monday recovered from early losses and rose moderately on weakness in the yen, which fell to a 3-week low against the dollar after the BOJ announced unscheduled bond purchases. A decline in T-note yields Monday limited gains in the dollar.
Monday’s U.S. economic news was mixed for the dollar. On the bullish side, the Jul Dallas Fed manufacturing outlook level of general business activity rose +3.2 to -20.0, stronger than expectations of -22.5. Conversely, the Jul MNI Chicago PMI rose +1.3 to 42.8, weaker than expectations of 43.5.
Fed comments were supportive of the dollar. On Sunday, Minneapolis Fed President Kashkari said the inflation outlook in the U.S. is "quite positive" and that "the base case scenario seems to be that we'll have a slowing economy, but that we would avoid a recession." Also, Chicago Fed President Goolsbee said Monday that monthly inflation readings are coming in "quite good," but he hasn't yet decided on whether to support pausing interest-rate increases at the next FOMC meeting.
EUR/USD (^EURUSD) Monday fell by -0.18%. The euro Monday gave up an overnight advance and turned lower as strength in the dollar sparked long liquidation in EUR/USD. A weaker-than-expected German Jun retail sales report was also bearish for the euro. The euro on Monday initially moved higher from stronger-than-expected Eurozone GDP and core CPI reports. Also, comments from ECB President Lagarde gave the euro a boost when she said the ECB could raise interest rates again, even if it pauses at its next meeting in September.
The Eurozone Jul CPI eased to +5.3% y/y from +5.5% y/y in June, right on expectations and the smallest increase in 1-1/2 years. However, Jul core CPI rose +5.5% y/y, unchanged from Jun and stronger than expectations of +5.4% y/y.
Eurozone Q2 GDP rose +0.3% q/q and +0.6% y/y, stronger than expectations of +0.2% q/q and +0.5% y/y.
German Jun retail sales fell -0.8% m/m, weaker than expectations of -0.3% m/m.
USD/JPY (^USDJPY) on Monday rose by +0.76%. The yen Monday tumbled to a 3-week low against the dollar after the BOJ announced an unscheduled bond-purchase operation in an attempt to keep 10-year JGB bond yields from climbing. The BOJ announced that it would buy the equivalent of more than $2 billion of bonds at market rates after the 10-year JGB bond yield Monday climbed to a 9-year high of 0.614%. Bond yields have surged since last Friday when the BOJ tweaked its yield curve control program and effectively raised the upper limit of its 10-year JGB yield target to 1.0% from 0.5%.
Monday’s Japanese economic news was mixed for the yen. On the negative side, Jun industrial production rose +2.0% m/m, the most in 4 months but weaker than expectations of +2.4% m/m. Conversely, the Jul consumer confidence index rose +0.9 to a 19-month high of 37.2, stronger than expectations of 36.2. Also, Jun retail sales fell -0.4% m/m, stronger than expectations of -0.7% m/m.
August gold (GCQ3) Monday closed up +10.1 (+0.52%), and Sep silver (SIU23) closed up +0.477 (+1.95%). Precious metals prices Monday settled moderately higher. Precious metals rose Monday on favorable inflation comments from Minneapolis Fed President Kashkari and Chicago Fed President Goolsbee, suggesting they may favor a pause in Fed rate hikes. Gains in gold were limited as fund liquidation of long gold holdings weighs on gold prices after long gold holdings in ETFs fell to a new 3-year low last Friday. Also, hawkish comments from ECB President Lagarde were bearish for precious metals when she said the ECB could raise interest rates again, even if it pauses at its next meeting in September.
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.
