The dollar index (DXY00) today is up by +0.23% and posted a fresh 2-month high. The dollar is supported by today's US economic news that shows a resilient labor market with sticky price pressures and labor costs, which are hawkish for Fed policy. The dollar also has carryover support from Wednesday, when Fed Chair Powell dampened expectations of a Fed rate cut in September when he said the labor market "looks solid" and a moderately restrictive monetary policy is appropriate due to inflation risks from tariffs.
US weekly initial unemployment claims rose by +1,000 to 218,000, showing a stronger labor market than expectations of 224,000.
US Jun personal spending rose +0.3% m/m, weaker than expectations of +0.4% m/m. Jun personal income rose +0.3% m/m, stronger than expectations of +0.2% m/m.
The US Jun core PCE price index, the Fed's preferred inflation gauge, rose +2.8% y/y, stronger than expectations of +2.7% y/y.
The US Q2 employment cost index rose +0.9%, stronger than expectations of +0.8%.
The US Jul MNI Chicago PMI rose +6.7 to a four-month high 47.1, stronger than expectations of 42.0.
In the latest tariff news, President Trump said today that he will impose a tariff rate of 15% on imports from South Korea and that a deal with Taiwan was also being drafted as the two countries reached "a certain degree of consensus." In addition, trade deals are in the offing for Thailand and Cambodia after they agreed to a ceasefire.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 40% at the September 16-17 FOMC meeting and 36% at the following meeting on October 28-29.
EUR/USD (^EURUSD) today is up by +0.15%. The euro has garnered support from today's economic news that shows strength in the Eurozone labor market after the Jun unemployment rate remained unchanged at a record low of 6.2%. Gains in the euro are limited due to a stronger dollar, and after German Jul CPI rose less than expected at the slowest pace in 10 months, a dovish factor for ECB policy.
The Eurozone Jun unemployment rate remained unchanged at a record low of 6.2%, showing a stronger labor market than expectations of a +0.1 point increase to 6.3%.
The German Jul unemployment change rose +2,000, showing a stronger labor market than expectations of +15,000.
German Jul CPI (EU harmonized) eased to +1.8% y/y from +2.0% y/y in Jun, weaker than expectations of +1.9% y/y and the slowest pace of increase in 10 months.
Swaps are pricing in an 11% chance of a -25 bp rate cut by the ECB at the September 11 policy meeting.
USD/JPY (^USDJPY) today is up by +0.64%. The yen gave up overnight gains and tumbled to a 4-month low against the dollar on dovish comments from BOJ Governor Ueda, who said the BOJ wasn't in danger of falling behind on inflation after keeping interest rates unchanged, which dampened expectations of a near-term rate hike by the BOJ. An unexpected decline in the Japanese Jul consumer confidence index also weighed on the yen.
The yen initially moved higher in overnight trading after the BOJ kept the overnight call rate unchanged at 0.50% but raised its 2025 Japan GDP estimate and 2025 core CPI estimate. Also, today's news that showed stronger-than-expected Japanese industrial production and retail sales was supportive for the yen.
The yen continues to be undercut by concerns that the LDP's loss of its majority in Japan's upper house in the July 20 elections may lead to fiscal deterioration in Japan's government finances, as the government boosts spending and implements tax cuts.
The Japan Jul consumer confidence index unexpectedly fell -0.8 to 33.7, weaker than expectations of an increase to 35.0.
Japan's Jun industrial production unexpectedly rose +1.7% m/m, stronger than expectations of a decline of -0.8% m/m and the biggest increase in four months.
Japan's Jun retail sales rose +1.0% m/m, stronger than expectations of +0.5% m/m and the biggest increase in five months.
As expected, the BOJ voted 9-0 to keep the overnight call rate unchanged at 0.50%. The BOJ raised its 2025 GDP forecast to 0.6% from 0.5% previously and raised its 2025 core CPI ex-energy estimate to 2.8% from 2.3% previously.
BOJ Governor Ueda said the BOJ is continuing with stimulative policy settings even as the price trend rises because the trend is still below its 2.0% target.
August gold (GCQ25) today is up +1.80 (+0.05%), and September silver (SIU25) is down -1.089 (-2.89%). Precious metals are mixed today, with silver falling to a 4-week low. Concerns that US tariff policy will undercut global growth are fueling some safe-haven demand for precious metals after President Trump on Wednesday said he will impose a tariff rate of 25% on India starting August 1 and suggested he would add an additional penalty over the country's energy purchases from Russia. Precious metals continue to receive safe-haven support from geopolitical risks, including the conflicts in Ukraine and the Middle East.
Gains in precious metals today are limited due to the strength of the dollar. Also, today's US economic news shows a resilient labor market and sticky price pressures and labor costs, which are hawkish for Fed policy and negative for precious metals. In addition, precious metals are being undercut by negative carryover from Wednesday, when Fed Chair Powell said a moderately restrictive monetary policy is appropriate due to inflation risks from tariffs.
Silver prices are sharply lower today on negative carryover from a -21% plunge in copper prices today to a 3.5-month low after President Trump excluded refined copper imports from tariffs. Additionally, concerns that Chinese industrial metals demand remains stagnant are undercutting silver prices after China's July manufacturing PMI unexpectedly fell -0.4 to 49.3, weaker than expectations of no change at 49.7.
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.
