The dollar index (DXY00) today is up by +0.16%. The dollar is mildly higher today after a global IT outage prompted risk aversion in asset markets and sparked some safe-haven buying of the dollar. Also, higher T-note yields today are bullish for the dollar. Gains in the dollar are limited after a recovery in US stock index futures from overnight losses curbed liquidity demand for the dollar.
The markets are discounting the chances for a -25 bp rate cut at 5% for the July 30-31 FOMC meeting and 99% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) today is down by -0.11%. The euro today is posting modest losses due to a stronger dollar. Also, an easing of Eurozone price pressures is dovish for ECB policy and bearish for the euro after the German producer prices contracted for the twelfth consecutive month year-over-year in June. In addition, dovish comments from ECB Governing Council member Simkus weighed on the euro.
The German June PPI fell -1.6% y/y, right on expectations, and the twelfth consecutive month prices have fallen year-over-year.
ECB Governing Council member Simkus said, "If there are no surprises or black swans and inflation converges as expected, further monetary-policy easing will undoubtedly be on the table in the next ECB meetings."
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 80% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.06%. The yen today is under pressure from higher T-note yields. Also, the action by Japan's Cabinet Office to cut its Japan 2024 GDP projection is negative for the yen. However, losses in the yen are limited after Japan's June national CPI rose +2.8% y/y, above the BOJ’s 2% target, which is hawkish for BOJ policy.
Japan's Cabinet Office cut its Japan 2024 GDP projection to 0.9% from a previous estimate of 1.3% and raised its 2024 inflation estimate to 2.8% from 2.5%.
Japan's June national CPI rose +2.8% y/y, weaker than expectations of +2.9% y/y. Japan’s June national CPI ex-fresh food and energy rose +2.2% y/y, right on expectations.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 43% for the July 31 meeting and 58% for the September 20 meeting.
August gold (GCQ24) today is down -51.30 (-2.09%), and September silver (SIU24) is down -0.899 (-2.97%). Precious metals prices today are sharply lower, with silver falling to a 3-week low. A stronger dollar today and higher global bond yields have sparked long liquidation in precious metals. Also, a recovery in US stock index futures from overnight losses has reduced safe-haven demand for precious metals. Silver prices were undercut today after Japan's Cabinet Office cut its Japan 2024 GDP estimate, a bearish factor for industrial metals demand.
Gold has support from demand as an inflation hedge after Japan's Cabinet Office raised its Japan 2024 inflation estimate to 2.8% from 2.5% and after the US 10-year breakeven inflation rate today climbed to a 2-week high. Also, continued fund buying of gold supported gold prices after long gold holdings in ETFs rose to a 3-1/2 month high on Thursday.
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.
