The dollar index (DXY00) today is down by -0.23% on dovish comments from Chicago Fed President Goolsbee, who said the US labor market and some leading indicators on the economy are flashing warning signs. The dollar is also lower on today’s weaker-than-expected US July housing starts report. The dollar recovered from its worst levels after the University of Michigan’s Aug US consumer sentiment index rose more than expected.
US July housing starts fell -6.8% m/m to a 4-year low of 1.238 million, weaker than expectations of 1.333 million. July building permits, a proxy for future construction, fell -4.0% m/m to a 4-year low of 1.396 million, weaker than expectations of 1.425 million.
The University of Michigan US Aug consumer sentiment index rose +1.4 to 67.8, stronger than expectations of 66.9.
Chicago Fed President Goolsbee said the US labor market and some leading indicators on the economy are flashing warning signs, and there are concerns unemployment will continue to rise.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 26% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is up by +0.16%. Weakness in the dollar today is pushing the euro higher. However, the euro is being undercut by lower European government bond yields.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 98% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -0.75%. The yen is rallying against the dollar today as T-note yields fell on the weaker-than-expected US housing starts report. The yen is moving higher today despite an unexpected decline in Japan’s Jun tertiary industry activity index. Also, today’s sharp +3% rally in the Nikkei Stock Index to a 2-week low reduced safe-haven demand for the yen.
The Japan Jun tertiary industry activity index unexpectedly fell -1.3% m/m, weaker than expectations of +0.3% m/m.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and +13% for the October 30-31 meeting.
December gold (GCZ24) today is up +26.80 (+1.08%), and September silver (SIU24) is down -0.063 (-0.22%). Dec gold today posted a new contract high and nearest-futures Aug gold posted an all-time high of $2,493.90 an ounce.
Weakness in the dollar today and a decline in global bond yields are bullish for precious metals. Also, dovish comments today from Chicago Fed President Goolsbee suggest he favors a Fed rate cut next month when he said the US labor market and some leading indicators on the economy are flashing warning signs. Gold also found support on today’s weaker-than-expected US housing starts report, which was a dovish factor for Fed policy. Finally, safe-haven demand for precious metals remains strong as an attack by Iran on Israel may be imminent in retaliation for the recent assassination of a Hamas political leader in Tehran.
Silver prices are under pressure today due to industrial metal demand concerns after the US July housing starts and building permits fell more than expected to 4-year lows, which were bearish factors for industrial metals demand.
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