The dollar index (DXY00) today is up by +0.38%. Higher T-note yields today are supporting moderate gains in the dollar. The dollar is also climbing on reduced speculation that the Fed will cut interest rates aggressively as swap markets are discounting the chances for a 50 bp rate cut at next week’s FOMC meeting at 28% from 50% after the release of last Friday’s US payroll report.
Today’s US economic news supported the dollar after Jul wholesale trade sales rose +1.1% m/m, stronger than expectations of +0.3% m/m and the largest increase in 5 months.
The markets are discounting the chances at 100% for a -25 bp rate cut at the Sep 17-18 FOMC meeting and at 28% for a -50 bp rate cut at that meeting.
EUR/USD (^EURUSD) today is down by -0.42%. The euro is under pressure today from a stronger dollar, and today’s economic news that showed Eurozone Sep Sentix investor confidence unexpectedly fell to an 8-month low. Also, expectations that the ECB will cut interest rates by 25 bp at Thursday’s policy meeting are weighing on the euro.
Eurozone Sep Sentix investor confidence unexpectedly fell -1.5 to an 8-month low of -15.4, weaker than expectations of an increase to -12.2.
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 +0.44%. The yen is under pressure today after Japan's Q2 GDP was unexpectedly revised lower. Also, today’s slide in the Nikkei Stock Index to a 1-month low boosted some safe-haven demand for the yen. In addition, higher T-note yields today are weighing on the yen. A bullish factor for the yen was today’s news that showed Japan’s Aug eco watchers survey outlook rose to a 5-month high.
Japan Q2 GDP was unexpectedly revised lower to +2.9% (q/q annualized) from +3.1%, weaker than expectations of an upward revision to +3.2%.
The Japan Aug eco watchers survey outlook rose +2.0 to a 5-month high of 50.3, stronger than expectations of 48.6.
Swaps are pricing in the chances for a +10 bp rate hike by the BOJ at 0% for the September 20 meeting and at +14% for the October 30-31 meeting.
December gold (GCZ24) today is up +2.2 (+0.09%), and December silver (SIZ24) is up +0.332 (+1.18%). Precious metals today are moderately higher. Expectations for the ECB to cut interest rates by 25 bp at Thursday’s policy meeting are bullish for precious metals. Also, today’s weaker-than-expected news on Chinese Aug consumer and producer prices bolsters the chances for the PBOC to ease monetary policy further, a supportive factor for precious metals.
Gains in precious metals are limited today due to a stronger dollar. Also, higher global government bond yields today are negative for precious metals. A negative factor for silver was today’s news that showed an unexpected downward revision to Japan Q2 GDP, a negative factor for industrial metals demand.
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