The dollar index (DXY00) Tuesday rose by +0.01% and posted a 2-week high. Higher T-note yields Tuesday were supportive for the dollar. Also, expectations for the Fed to raise the fed funds target range by 25 bp following the conclusion of the Tue/Wed FOMC meeting is bullish for the dollar. The dollar raced to its high Tuesday after the Conference Board U.S. Jul consumer confidence index rose more than expected to a 2-year high. The dollar gave up most of its advance Tuesday as the yuan strengthened to a 1-week high against the dollar after China’s Politburo signaled more support for China’s economy.
Tuesday’s U.S. economic news was hawkish for Fed policy and bullish for the dollar. The May S&P CoreLogic composite-20 home price index fell -1.70% y/y, a smaller decline than expectations of -2.35% y/y. Also, the Conference Board Jul consumer confidence index rose +6.9 to a 2-year high of 117.0, stronger than expectations of 112.0. In addition, the Jul Richmond Fed manufacturing survey fell -1 to -9, a smaller decline than expectations of -10.
EUR/USD (^EURUSD) Tuesday fell by -0.13% and posted a 1-1/2 week low. Stronger-than-expected U.S. economic news Tuesday on home prices and consumer confidence was dollar supportive and weighed on the euro. Also, a slump in German business confidence undercut EUR/USD after the German Jul IFO business climate fell more than expected to an 8-month low. In addition, the euro weakened after the ECB’s Quarterly Bank Lending Survey indicated slack demand for corporate loans.
The German Jul IFO business climate fell -1.3 to an 8-month low of 87.3, weaker than expectations of 88.0.
USD/JPY (^USDJPY) on Tuesday fell by -0.37%. The yen moved higher Tuesday on the prospects for additional stimulus measures in China after China’s Politburo signaled more support for the economy. An increase in China’s economic growth would benefit Japan, China’s third-largest trading partner. Gains in the yen were limited due to higher T-note yields.
August gold (GCQ3) Tuesday closed up +1.5 (+0.08%), and Sep silver (SIU23) closed up +0.243 (+0.99%). Precious metals prices Tuesday closed higher. Gold recovered from a 1-week low Tuesday and posted modest gains on speculation the Fed on Wednesday will signal a pause in its rate high campaign after raising interest rates by 25 bp. Silver prices also found support after China’s Politburo on Tuesday signaled more support for China’s economy, which should boost China’s demand for industrial metals.
Gold prices Tuesday initially fell to a 1-week low after the dollar index climbed to a 2-week high. Also, higher global bond yields Tuesday were negative for precious metals prices.
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.
