The dollar index (DXY00) Tuesday fell by -0.01%. The dollar on Tuesday fell back from a 2-1/2 week high and finished little changed. Better-than-expected US economic news Tuesday on May S&P CoreLogic composite-20 home prices, Jun JOLTS job openings, and Jul consumer confidence supported the dollar. Also, the start of the 2-day FOMC meeting Tuesday sparked short-covering in the dollar. However, the dollar gave up its gains Tuesday when the 10-year T-note yield dropped to a 4-1/2 month low, weakening its interest rate differentials.
The US May S&P CoreLogic composite-20 home price index rose +6.81% y/y, stronger than expectations of +6.60% y/y.
US Jun JOLTS job openings fell -46,000 to 8.184 million, showing a stronger labor market than expectations of 8.000 million.
The Conference Board US Jul consumer confidence index rose +2.5 to 100.3, stronger than expectations of 99.7.
The markets are discounting the chances for a -25 bp rate cut at 4% for this week's Tue/Wed FOMC meeting and 100% for the following meeting on Sep 17-18 if the FOMC does not cut rates this week.
EUR/USD (^EURUSD) Tuesday fell by -0.07%. The euro on Tuesday extended Monday’s slide and posted a 3-1/2 week low due to a stronger dollar. Weakness in the euro was limited due to Tuesday’s stronger-than-expected economic news on Eurozone Q2 GDP, Eurozone Jul economic confidence, and German Jul CPI.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 95% for the September 12 meeting.
Eurozone Q2 GDP grew +0.3% q/q and +0.6% y/y, stronger than expectations of +0.2% q/q and +0.5% y/y.
Eurozone Jul economic confidence fell -0.1 to 95.8, stronger than expectations of 95.2.
German Jul CPI (EU harmonized) rose +0.5% m/m and +2.6% y/y, stronger than expectations of +0.4% m/m and +2.5% y/y.
USD/JPY (^USDJPY) Tuesday fell by -0.47%. The yen recovered from moderate losses on Tuesday and rallied after public broadcaster NHK reported that BOJ board members will discuss raising interest rates to 0.25% from the current range of 0% to 0.1% on Wednesday. Also, Tuesday’s news showed that the Japan Jun jobless rate unexpectedly fell, a hawkish factor for BOJ policy and a positive factor for the yen. The yen is also supported by speculation the BOJ will announce that it will cut its monthly bond purchases after Wednesday’s 2-day policy meeting.
The yen on Tuesday was initially under pressure from a stronger dollar. Also, lower Japanese government bond yields are negative for the yen after the 10-year JGB bond yield fell to a 1-month low Tuesday.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 70% for Thursday’s meeting and 100% for the September 20 meeting if there is no rate hike at the July 31 meeting.
The Japan Jun jobless rate unexpectedly fell -0.1 to 2.5%, showing a stronger labor market than expectations of no change at 2.6%.
August gold (GCQ24) Tuesday closed up +27.20 (+1.14%), and September silver (SIU24) closed up +0.659 (+2.36%). Precious metals Tuesday settled moderately higher. Short covering ahead of a raft of central bank meetings this week from the Fed, BOE, and BOJ is boosting precious metals. Lower global bond yields Tuesday were bullish for precious metals. Gains in precious metals accelerated Tuesday on a surge in safe-haven demand after Israel’s military struck Beirut’s suburbs in response to a weekend attack, threatening to widen the conflict in the Middle East.
Tuesday’s rally in the dollar index to a 2-1/2 week high limited the upside in precious metals prices. Also, stronger-than-expected US economic news Tuesday on May S&P CoreLogic composite-20 home prices, Jun JOLTS job openings, and Jul consumer confidence were hawkish for Fed policy and bearish for precious metals. Silver prices had carryover pressure from Tuesday’s decline in copper prices to a 4-month low.
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.
