The dollar index (DXY00) today is down by -0.19%. The dollar is lower as T-note yields declined on the weaker-than-expected US Jul PPI report, which bolstered the chances for a Fed rate cut at the September FOMC meeting. Today’s rally in stocks has also reduced liquidity demand for the dollar.
US July PPI final demand eased to +2.2% y/y from +2.7% y/y in June, a smaller increase than expectations of +2.3% y/y. Also, July PPI ex-food and energy eased to +2.4% y/y from +3.0% y/y in June, better than expectations of +2.6% y/y.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 59% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up by +0.22% at a 1-week high. Dollar weakness today is providing support to the euro. However, the euro was undercut after the German August ZEW investor confidence survey fell more than expected to a 7-month low.
The German Aug ZEW expectation of economic growth survey fell -22.6 to a 7-month low of 19.2, weaker than expectations of 34.0.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 99% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -0.14%. Japanese economic news today supported the yen after July machine tool orders rose for a third month, and after July PPI rose at the fastest pace in 11 months, a hawkish factor for BOJ policy. The yen extended its gains against the dollar today after T-note yields fell. However, today’s +3% surge in the Nikkei Stock Index to a 1-week high reduced safe-haven demand for the yen.
Japan July machine tool orders rose +8.4% y/y, the third consecutive month orders increased.
Japan's July PPI rose +3.0% y/y, the largest increase in 11 months.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and +8% for the October 30-31 meeting.
December gold (GCZ24) today is up +7.30 (+0.29%), and September silver (SIU24) is down -0.298 (-1.06%). Gold and silver prices today are mixed, with gold climbing to a 1-week high. Today’s dollar weakness is supportive of metals prices. Also, lower global bond yields today are bullish for precious metals prices. In addition, safe-haven demand for precious metals has strengthened as an attack by Iran on Israel may be imminent in retaliation for the recent assassination of a Hamas political leader in Tehran.
Today's gains in precious metals prices are limited as strength in equity markets has curbed some safe-haven demand for precious metals. Also, concerns about China’s economy are undercutting industrial metals demand and silver prices.
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