The dollar index (DXY00) Tuesday fell by -0.24% and posted a 2-month low on lower T-note yields. Also, strength in stocks on Tuesday reduced the liquidity demand for the dollar. The Chinese yuan strengthened against the dollar Tuesday after China signaled more economic support measures.
Comments Tuesday from New York Fed President Williams were neutral for the dollar when he said he "doesn't have a recession in his forecast," but has lowered his growth forecasts "a little bit" for next year as some of the tightening of monetary policy and some effects of credit tightening will weigh on demand in 2024.
EUR/USD (^EURUSD) Tuesday rose by +0.02%. The euro Tuesday climbed to a 2-month high on dollar weakness. EUR/USD fell back from its best levels after Tuesday’s German Jul ZEW survey expectations of economic growth indicator fell -6.2 to a 7-month low of 14.7, weaker than expectations of -10.6.
USD/JPY (^USDJPY) on Tuesday fell -0.63%. The yen on Tuesday moved higher for the fourth consecutive session and posted a 3-week high against the dollar. A decline in T-note yields Tuesday was supportive for the yen. Also, Monday’s jump in Japanese inflation expectations spurred short covering in the yen. The increase in Japan 10-year breakeven inflation rate to an 8-1/2 year high of 1.16% on Monday may prompt the BOJ as soon as this month’s policy meeting to signal it could soon curb its highly stimulative policies.
Tuesday’s Japanese economic news was bearish for the yen after Japan Jun machine tool orders fell -21.7% y/y, the sixth consecutive month that orders have declined.
August gold (GCQ3) Tuesday closed up +6.1 (+0.32%), and Sep silver (SIU23) closed down -0.064 (-0.27%). Precious metals prices Tuesday settled mixed, with gold climbing to a 2-week high. Tuesday’s slump in the dollar index to a 2-month low was bullish for metals prices. Also, lower T-note yields Tuesday were bullish for metals prices. In addition, metals are gaining on expectations that Wednesday’s U.S. Jun CPI will show consumer prices continue to ease, taking the pressure off the Fed to raise interest rates. Gains in gold were limited by ongoing fund liquidation of gold as holdings in gold ETFs fell to a 3-3/4 month low on Monday. Also, strength in stocks on Tuesday reduced the safe-haven demand 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.
