The dollar index (DXY00) today is up by +0.25% at a 4-week high. Weakness in stocks today has boosted some liquidity demand for the dollar. Also, persistent weakness in the euro is benefitting the dollar as political upheaval in France knocked the euro down to a 5-week low today. In addition, the dollar is supported by expectations the Fed will leave policy unchanged at the conclusion of the 2-day FOMC meeting on Wednesday.
The markets are discounting the chances for a -25 bp rate cut at 1% for the June 11-12 FOMC meeting, 8% for the following meeting on July 30-31, and 49% for the meeting after that on Sep 17-18.
EUR/USD (^EURUSD) today is down by -0.36% at a 5-week low. The euro remains under pressure due to political uncertainty in France after French President Macron on Sunday called for early parliamentary elections later this month in an attempt to stop the advance of his far-right rivals. Losses in EUR/USD are limited after ECB Governing Council member Rehn said the ECB isn't pre-committing to any path for interest rates.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 8% for the July 18 meeting and 50% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.12%. The yen fell to a 1-week low today against the dollar. Divergent bond yields weigh the yen with the government bond yields of other G-7 countries well above Japan’s bond yields. Lower T-note yields today are limiting losses in the yen. The yen also garnered support today on strong economic news after Japan's May machine tool orders rose +4.2% y/y, the largest increase in 20 months.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 8% for the June 14 meeting and at 68% for the July 31 meeting.
August gold (GCQ4) today is up +4.90 (+0.21%), and July silver (SIN24) is down -0.544 (-1.82%). Precious metals today are mixed. Lower global bond yields today are supportive of precious metals. Also, political upheaval in France has boosted safe-haven demand for gold after French President Macron called for early parliamentary elections later this month. In addition, stock weakness today has sparked some safe-haven demand for precious metals.
Today’s rally in the dollar index to a 4-week high is bearish for metals prices. Negative carryover from weakness in copper prices today is weighing on silver prices on signs of weak copper demand in China after copper inventories on the Shanghai Futures Exchange climbed to a 4-year high, a sign of weak 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.
