The dollar index (DXY00) today is down by -0.54%. The dollar is retreating today as strength in stocks has reduced liquidity demand for the dollar. Lower T-note yields today are also pressuring the dollar.
US June leading economic indicators fell 0.3% m/m, right on expectations.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 5% at the July 29-30 FOMC meeting and 58% at the following meeting on September 16-17.
EUR/USD (^EURUSD) today is up by +0.47%. The euro is climbing today due to a weaker dollar. Also, expectations that the ECB is closer to the end of its easing cycle than the Federal Reserve are boosting the euro as the ECB has cut interest rates four times this year while the Fed has not cut rates yet this year. Additionally, US trade policies are prompting foreign investors to shift away from dollar-denominated assets and into euro-denominated assets.
Gains in the euro are limited due to concerns that President Trump is pushing for a minimum tariff of 15%-20% in any trade deal with the European Union (EU), as Mr. Trump has remained unmoved by the latest EU offer to reduce car tariffs. Higher tariff rates on EU goods could undercut the Eurozone economy, a bearish factor for the euro.
Swaps are pricing in a 1% chance of a -25 bp rate cut by the ECB at Thursday's policy meeting.
USD/JPY (^USDJPY) today is down by -0.96%. The yen is climbing today against the dollar after Prime Minister Ishiba said he would carry on as leader despite his ruling coalition LDP losing its majority after Sunday's upper house elections. Any moves in the yen today may be excessive due to below-average trading volume with Japanese markets closed for the Marine Day holiday.
The upside in the yen in the near term may be limited due to concerns that the LDP's loss of its majority in Japan's upper house may lead to fiscal deterioration in Japan's government finances, as the government boosts spending and implements tax cuts.
Japan's ruling Liberal Democratic Party (LDP) lost its majority in the upper house after Sunday's elections, with the LDP party winning only 47 seats, below the 50 it needed to win to maintain control.
August gold (GCQ25) today is up +53.50 (+1.59%), and September silver (SIU25) is up +0.821 (+2.13%). Precious metals are moving sharply higher today, with gold reaching a 4-week high. Today's dollar weakness and lower global government bond yields are bullish for precious metals. Also, precious metals have carryover support from last Friday when Fed Governor Waller expressed support for a Fed interest rate cut at the July 29-30 FOMC meeting. In addition, precious metals have safe-haven support from global trade tensions, following President Trump's announcement last Wednesday that he intends to send a tariff letter to more than 150 countries, notifying them that their tariff rates could be 10% or 15%, effective August 1.
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.
