The dollar index (DXY00) Friday fell by -0.21%. The dollar came under pressure Friday on an easing of safe-haven demand after Reuters reported that the Iranian government said it is ready to discuss limitations on its uranium enrichment levels. Also, President Trump said he is willing to give diplomacy more time and won't decide to strike Iran for another two weeks.
In addition, dovish comments Friday from Fed Governor Waller weighed on the dollar when he said, "I think we have room to bring interest rates down as early as July, and then we can see kind of see what happens with inflation." The dollar remained lower on the weaker-than-expected Philadelphia Fed business outlook report.
The US June Philadelphia Fed business outlook survey was unchanged at -4.0, weaker than expectations of an increase to -1.5.
US May leading economic indicators index fell -0.1% m/m, right on expectations, and the sixth consecutive month that the LEI has declined.
The markets are discounting the chances at 15% for a -25 bp rate cut after the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) Friday rose by +0.30%. The euro moved higher on Friday due to weakness in the dollar. However, gains in the euro were limited after the Eurozone's June consumer confidence index unexpectedly fell and after German May producer prices posted their biggest decline in eight months, which were dovish factors for ECB policy.
The Eurozone June consumer confidence index unexpectedly fell -0.1 to -15.3, weaker than expectations of an increase to -14.9.
German May PPI fell -1.2% y/y, right on expectations and the biggest decline in 8 months.
Swaps are discounting the chances at 7% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) Friday rose by +0.38%. The yen gave up overnight gains and fell to a 3-week low against the dollar Friday as an easing of Middle East tensions curbed safe-haven demand for the yen. Reuters reported that the Iranian government said it is ready to discuss limitations on its uranium enrichment levels, and President Trump said he's willing to wait two weeks to see if diplomacy will work before attacking Iran.
The yen initially moved higher Friday after Japan's May national CPI excluding fresh food and energy rose more than expected by the most in 16 months, a hawkish factor for BOJ policy. Also, comments from BOJ Governor Ueda were positive for the yen when he said the BOJ will raise the benchmark interest rate if its economic outlook is realized.
Japan's May national CPI rose +3.5% y/y, right on expectations. May national CPI ex-fresh food and energy rose +3.3% y/y, stronger than expectations of +3.2% y/y and the largest increase in 16 months.
BOJ Governor Ueda said Japan's real interest rate is significantly low, and the BOJ will raise the benchmark interest rate if its economic outlook is realized.
August gold (GCQ25) Friday closed down -22.40 (-0.66%), and July silver (SIN25) closed down -0.896 (-2.43%). Precious metals retreated on Friday, with gold sliding to a one-week low and silver falling sharply to a two-week low. An easing of Middle East tensions sparked long liquidation in precious metals after President Trump signaled he wants to give diplomacy a chance and will wait two weeks before deciding if the US would strike Iran.
Precious metals also fell on Friday's report from Reuters that said the Iranian government is ready to discuss limitations on its uranium enrichment levels, a sign that Iran may want to negotiate its way out of war with the US. In addition, hawkish comments from BOJ Governor Ueda undercut precious metals when he said the BOJ will raise the benchmark interest rate if its economic outlook is realized.
Friday's dollar weakness was supportive of metals prices. Also, dovish comments Friday from Fed Governor Waller boosted demand for gold as a store of value when he said, "I think we have room to bring interest rates down as early as July." In addition, Thursday's report from Bloomberg that said senior US officials are preparing for a possible strike on Iran boosted safe-haven demand for precious metals.
Industrial metals demand concerns weighed on silver prices on Friday due to the weaker-than-expected US Jun Philadelphia Fed business outlook survey and the weaker-than-expected UK May retail sales report. However, fund buying of silver continues to support prices as silver holdings in ETFs rose to a 2-1/4 year high Thursday.
UK May retail sales ex-auto fuel fell -2.8% m/m, weaker than expectations of -0.7% m/m and the biggest decline in nearly 1-1/2 years.
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.
