The dollar index (DXY00) today is down by -1.13% and tumbled to a 4-1/2 month low. The dollar sank today on the weaker-than-expected US Jul payroll report that showed the Jul payrolls rose less than expected and the Jul unemployment rate rose to a 2-3/4 year high. Also, wage pressures eased after Jul average hourly earnings grew at the slowest annual pace in 3 years. The Fed-friendly payroll report boosted the chances to 100% for the Fed to cut rates by 25 bp at the September FOMC meeting and by 71% for the Fed to cut interest rates by 50 bp, a bearish development for the dollar. The dollar extended its losses today after US Jun factory orders posted their biggest decline in 4 years.
US Jul nonfarm payrolls rose +114,000, weaker than expectations of +175,000, and Jun nonfarm payrolls were revised lower to +179,000 from the previously reported +206,000. The Jul unemployment rate unexpectedly rose +0.2 to a 2-3/4 year high of 4.3%, showing a weaker labor market than expectations of 4.1%.
US Jul average hourly earnings eased to +3.6% y/y from +3.8% y/y in June, weaker than expectations of +3.7% y/y and the slowest pace of increase in 3 years.
US Jun factory orders fell -3.3% m/m, weaker than expectations of -3.2% m/m and the largest decline in 4 years.
The markets are discounting the chances for a -25 bp rate cut at 100% for the Sep 17-18 FOMC meeting and by 69% for a -50 bp rate cut.
EUR/USD (^EURUSD) today is up by +1.12% at a 2-week high. The main bullish factor for the euro is today’s slump in the dollar. Gains in the euro are contained as European government bond yields fell to 6-month lows today, weighing on the euro’s interest rate differentials.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -1.57%. The yen today added to this week’s gains and soared to a 4-1/2 month high against the dollar. Today’s plunge in T-note yields is bullish for the yen. The yen also continues to have carryover support from Wednesday when the BOJ unexpectedly raised its benchmark interest rate to 0.25% from a range of 0% to 0.1% and said it would reduce its monthly pace of bond purchases.
Swaps are pricing in the chance of a +10 bp rate increase by the BOJ at 6% for the September 20 meeting.
December gold (GCZ24) today is up +33.80 (+1.36%), and September silver (SIU24) is up +0.358 (+1.26%). Precious metals today are moderately higher, with gold posting a 2-week high and silver posting a 1-week high. Today’s slump in the dollar index to a 4-1/2 month low is bullish for precious metals. Also, today’s weaker-than-expected US Jul nonfarm payrolls report knocked T-note yields lower and bolstered speculation the Fed may cut interest rates several times this year, a bullish factor for precious metals. In addition, today’s selloff in global equity markets has boosted safe-haven demand for precious metals. Finally, escalating geopolitical risks in the Middle East have spurred safe-haven buying of precious metals after Iran’s leader Ayatollah Ali Khamenei ordered a strike on Israel in response to the assassination of a Hamas political leader in Tehran.
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.
