The dollar index (DXY00) today is up by +0.17% at a 1-1/2 week high. The dollar is finding support from today’s US personal spending and the core PCE reports, which dampened speculation the Fed will cut interest rates by 50 bp at next month’s FOMC meeting. The dollar is also finding support today on month-end position rebalancing. However, the dollar fell back from its best levels after T-note yields gave up early gains and turned lower, weakening its interest rate differentials.
US July personal spending rose +0.5% m/m, right on expectations. July personal income rose +0.3% m/m, stronger than expectations of +0.2% m/m.
The US July core PCE price index, the Fed's preferred inflation gauge, remained unchanged from June at +2.6% y/y, better than expectations of an increase to +2.7% y/y.
The US Aug MNI Chicago PMI unexpectedly rose ++0.8 to 46.1, stronger than expectations of a decline to 44.8.
The University of Michigan Aug US consumer sentiment index was revised upward by +0.1 to 67.9, weaker than expectations of 68.1.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 31% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is down by -0.07% at a 1-1/2 week low. The euro is slightly lower today after Eurozone Aug consumer prices rose at the slowest pace in 3 years, a dovish factor for ECB policy. However, losses in the euro were contained after the Eurozone July unemployment rate unexpectedly fell to a record low, a hawkish factor for ECB policy. Also, comments today from ECB Executive Board member Schnabel were supportive of the euro when she said the ECB shouldn't lower interest rates too quickly.
The Eurozone Aug CPI eased to 2.2% y/y from 2.6% y/y, right on expectations and the smallest increase in 3 years. Also, the Aug core CPI eased to 2.8% y/y from 2.9% y/y in Jul, right on expectations.
The Eurozone July unemployment rate unexpectedly fell -0.1 to a record low of 6.4%, showing a stronger labor market than expectations of no change at 6.5%.
ECB Executive Board member Schnabel said the ECB shouldn't lower interest rates too quickly as risks to inflation's return to 2% persist.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 100% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.24%. The yen is under pressure today from weaker-than-expected Japanese economic reports. Losses in the yen are limited after Japan Aug Tokyo consumer prices rose more than expected, a hawkish factor for BOJ policy. The yen also found support today after T-note yields turned lower.
Japan July industrial production rose +2.8% m/m, weaker than expectations of +3.5% m/m.
Japan July retail sales rose +0.2% m/m, weaker than expectations of +0.4% m/m.
The Japan July jobless rate unexpectedly rose +0.2 to a 17-month high of 2.7%, showing a weaker labor market than expectations of no change at 2.5%.
Japan Aug Tokyo CPI rose +2.6% y/y, stronger than expectations of +2.3% y/y. Also, Aug Tokyo CPI ex-fresh food and energy rose +1.6% y/y, stronger than expectations of +1.4% y/y.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and at +11% for the October 30-31 meeting.
December gold (GCZ24) today is down -9.3 (-0.36%), and September silver (SIU24) is down -0.322 (-1.09%). Precious metals today are moderately lower. Today’s stronger dollar is weighing on precious metals prices. Also, today’s mixed US economic reports dampened speculation that the Fed will aggressively cut interest rates and were bearish for gold. In addition, hawkish comments from ECB Executive Board member Schnabel undercut gold prices today when she said the ECB shouldn't lower interest rates too quickly.
Losses in precious metals today are limited after Eurozone Aug consumer prices rose at the slowest pace in 3 years, a dovish factor for ECB policy. Also, the safe-haven demand for precious metals remains strong due to tensions in the Middle East. In addition, fund buying of gold supports gold prices as long gold positions in ETFs rose to a 6-month high 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.
