The dollar index (DXY00) today is up by +0.26% at a 7-week high. The dollar today is strengthening as weakness in stocks has boosted liquidity demand for the dollar. Also, weaker-than-expected Eurozone PMI reports today undercut the euro, and the yen fell on weaker-than-expected Japanese CPI news. The dollar extended its gains on today’s better-than-expected US June S&P PMI reports.
The US June S&P manufacturing PMI unexpectedly rose +0.4 to 51.7, stronger than expectations of a decline to 51.0. Also, the June S&P services PMI unexpectedly rose +0.3 to a 2-year high of 55.1, stronger than expectations of a decline to 54.0.
US May existing home sales fell -0.7% m/m to a 4-month low 4.11 million, slightly stronger than expectations of 4.10 million.
US May leading indicators fell -0.5% m/m, weaker than expectations of -0.3% m/m.
The markets are discounting the chances for a -25 bp rate cut at 10% for the July 30-31 FOMC meeting and 61% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) today is down by -0.10%. The euro gave up early gains today and turned lower on weaker-than-expected Eurozone PMI reports, a dovish factor for ECB policy. The euro also remains under pressure by French President Macron’s call for snap elections later this month, which boosts political uncertainty in France, the Eurozone’s second-largest economy.
The Eurozone June S&P manufacturing PMI unexpectedly fell -1.7 to a 6-month low of 45.6, weaker than expectations of an increase to 47.9. The June S&P composite PMI unexpectedly fell -1.4 to 50.8, weaker than expectations of an increase to 52.5.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 6% for the July 18 meeting and 63% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.20%. The yen today fell to a new 7-week low against the dollar. The yen is under pressure from today’s weaker-than-expected news on Japanese consumer prices, a dovish factor for BOJ policy. Losses in the yen were limited by concern that Japanese authorities were close to intervening in the currency market to support the yen after BOJ Governor Ueda said authorities needed to watch the forex impact on the yen on prices and growth. Also, a decline in T-note yields today is supportive of the yen.
Japan's May national CPI rose +2.8% y/y, increasing from +2.5% in April but slightly weaker than expectations of +2.9% y/y. May national CPI ex-food and energy rose +2.1% y/y, weaker than expectations of +2.4% y/y and the slowest pace of increase in 20 months.
The Japan Jun Jibun Bank manufacturing PMI eased to 50.1 from 50.4 in May.
BOJ Governor Ueda said the Japanese economy should keep growing above the potential growth rate, and authorities must watch the forex impact on the yen to prices and growth.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 48% for the July 31 meeting and 61% for the September 20 meeting.
August gold (GCQ4) today is down -22.10 (-0.93%), and July silver (SIN24) is down -1.061 (-3.44%). Precious metals today are moderately lower. Gold prices fell back from a 2-week high and turned lower after better-than-expected US June S&P PMI reports fueled a rally in the dollar index to a 7-week high. Silver prices were undercut today after US May existing home sales fell to a 4-month low and the Eurozone Jun S&P manufacturing PMI unexpectedly fell to a 6-month low, negative factors for industrial metals demand.
Gold prices have been supported by continued gold buying by the world’s central banks as a dollar diversification strategy. World Gold Council data for Q1 showed that the central bank of Turkey bought 30 MT of gold, China’s central bank bought 27 MT of gold, and India's central bank bought 18.5 MT of gold. Also, lower global bond yields today are bullish for precious 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.
