The dollar index (DXY00) today is down slightly by -0.02%. The dollar today gave up overnight gains and turned slightly lower as the euro strengthened after French political risks eased. The dollar today initially moved higher as higher T-note yields strengthened the dollar’s interest rate differentials. The dollar also found support in today’s US economic news, which showed that the Jun Empire manufacturing survey general business conditions index rose more than expected to a 4-month high.
The US Jun Empire manufacturing survey general business conditions index rose +9.6 to a 4-month high of -6.0, stronger than expectations of -10.0.
On Sunday, Minneapolis Fed President Kashkari said the Fed is in a good position to take its time and watch incoming data before starting to cut interest rates.
The markets are discounting the chances for a -25 bp rate cut at 10% for the July 30-31 FOMC meeting and 60% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) today is up by +0.14%. The euro is posting moderate gains today after Eurozone Q1 labor costs were revised upward, a hawkish factor for ECB policy. Also, political uncertainty in France eased slightly today after Le Pen, leader of the National Rally party that is leading in the polls, said if her party wins in the upcoming national elections, she would co-operate with French President Macron.
Eurozone Q1 labor costs were revised upward to 5.1% y/y from the previously reported 4.9% y/y.
ECB Governing Council member Vujcic said an interest rate cut in September would require an improvement in the ECB's inflation outlook.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 11% for the July 18 meeting and 56% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.32%. The yen is under pressure today against the dollar on weak Japanese economic news after Japan's Apr core machine orders fell by the most in 5 months, a dovish factor for BOJ policy. Also, higher T-note yields today are undercutting the yen. Losses in the yen are limited after BOJ Governor Ueda said today that he needs to continue to closely monitor foreign exchange rates and import prices for any impact on inflation.
Japan Apr core machine orders fell -2.9% m/m, the biggest decline in 5 months.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 38% for the July 31 meeting and at 54% for the September 20 meeting.
August gold (GCQ4) today is down -14.2 (-0.60%), and July silver (SIN24) is down -0.077 (-0.26%). Precious metals today are moderately lower. Higher global bond yields today are bearish for precious metals. Also, reduced political uncertainty in France has curbed safe-haven demand for precious metals after National Party leader Le Pen said she would work with French President Macron if she won in the upcoming French national elections. In addition, hawkish comments from Minneapolis Fed President Kashkari undercut gold when he said the Fed could take its time before cutting interest rates. Silver prices were undercut on Chinese industrial metals demand concerns after today’s economic reports showed China May industrial production rose less than expected and China May new home prices fell -0.71% m/m, the biggest decline in 9-1/2 years.
Weakness in the dollar today is supportive of metals prices. Silver also garnered support from today’s US economic news that showed the Jun Empire manufacturing survey general business conditions index rose more than expected to a 4-month high, a positive factor for industrial metals demand.
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.
