The dollar index (DXY00) Monday rose slightly by +0.03% on hawkish Fed comments that pushed T-note yields higher. The dollar gave up most of its gains as strength in stocks reduced the liquidity demand for the dollar. Also, a negative carryover from last Friday weighed on the dollar when U.S. July payrolls rose less than expected, bolstering expectations for the Fed to pause its interest rate hike campaign.
Monday’s U.S. economic news supported the dollar after Jun consumer credit rose +$17.847 billion, stronger than expectations of +$13.0 billion.
Hawkish Fed comments were bullish for the dollar after Fed Governor Bowman said that "additional rate increases will likely be needed to get inflation on a path down to the FOMC's 2% target" in order to fully restore price stability. Also, NY Fed President Williams said, "I expect that Fed policy will need to be kept restrictive for some time" and that the need for more rate hikes is "an open question."
EUR/USD (^EURUSD) Monday rose by +0.01%. The euro Monday was little changed. Supporting the euro was strength in European government bond yields along with an unexpected increase in Eurozone Aug Sentix investor confidence. However, gains in EUR/USD were limited after German Jun industrial production fell more than expected.
The Eurozone Aug Sentix investor confidence index unexpectedly rose +3.6 to -18.9, stronger than expectations of a decline to -24.5.
German Jun industrial production fell -1.5% m/m, weaker than expectations of -0.5% m/m.
USD/JPY (^USDJPY) on Monday rose by +0.48%. The yen was under pressure Monday after hawkish Fed comments pushed T-note yields higher. Also, a recovery in the Nikkei Stock Index from a 3-1/2 week low Monday to higher on the day curbed safe-haven demand for the yen.
October gold (GCV3) Monday closed down -6.1 (-0.31%), and Sep silver (SIU23) closed down -0.484 (-2.04%). Precious metals prices on Monday closed moderately lower, with silver falling to a 4-week low. Strength in the dollar on Monday weighed on metals prices. Also, hawkish Fed comments from NY Fed President Williams and Fed Governor Bowman pushed T-note yields higher and were negative for precious metals. Monday’s weaker-than-expected German Jun industrial production signals weak demand for industrials metals and is bearish for silver prices. In addition, fund liquidation in gold continues after long gold holdings in ETFs fell to a new 3-year low last Friday. Finally, a rally in stocks Monday curbed 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.
