The dollar index (DXY00) on Monday fell by -0.10% as mostly higher equity prices Monday curbed liquidity demand for the dollar. However, losses in the dollar were limited after the 10-year T-note yield climbed to a nearly 16-year high, strengthening the dollar’s interest rate differentials. Also, weakness in the yen was positive for the dollar as the yen nearly matched last Thursday’s 9-1/2 month low against the dollar.
EUR/USD (^EURUSD) on Monday rose by +0.23%. Dollar weakness Monday was supportive of the euro. Also, higher European government bond yields were bullish for EUR/USD. Gains in the euro were limited after Monday’s monthly report from the Bundesbank said the German economy “continues to be in a weak phase.” Also, Monday’s news that showed German producer prices in July fell by the most in 13 years was dovish for ECB policy and bearish for the euro.
In its monthly report, Germany's Bundesbank said, "The German economy continues to be in a weak phase. In the third quarter of 2023, economic output is likely to remain virtually unchanged again."
German Jul PPI fell -6.0% y/y, weaker than expectations of -5.1% y/y and the steepest drop in 13 years.
USD/JPY (^USDJPY) on Monday rose by +0.54%. Higher T-note yields on Monday weighed on the yen. Also, Monday’s rally in the Nikkei Stock Index reduced the safe-haven demand for the yen. In addition, the yen is under pressure as Bloomberg data shows the BOJ is purchasing Japanese bonds at a record pace this year as it tries to keep long-term bond yields low in its yield curve control program.
October gold (GCV3) Monday closed up +7.0 (+0.37%), and Sep silver (SIU23) closed up +0.607 (+2.67%). Precious metals prices on Monday pushed higher, with silver posting a 2-week high. A weaker dollar on Monday was bullish for metals prices. Also, Monday’s news that German producer prices in July fell by the most in 13 years was dovish for ECB policy and bullish for precious metals. In addition, metals found support from the Bundesbank’s monthly report that said, "The German economy continues to be in a weak phase,” which may prompt the ECB to slow or stop raising interest rates. Gains in gold were limited by rising global bond yields and ongoing fund liquidation of gold after long gold holdings in ETFs fell to a 3-1/3 year low last Friday.
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.
