The dollar index (DXY00) today is up by +0.10%. The dollar is climbing today on reduced global trade tensions after the US agreed to a trade deal with Japan. Strength in T-note yields today has also improved the dollar's interest rate differentials. Gains in the dollar are limited after US existing home sales fell more than expected to a 9-month low.
US June existing home sales fell -2.7% m/m to a 9-month low of 3.93 million, weaker than expectations of -0.7% to 4.00 million.
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 down by -0.24%. The euro is under pressure today from a stronger dollar. The euro is also weighed down by a Bloomberg report that stated the European Union plans to impose 30% tariffs on approximately $117 billion (100 billion euros) worth of US goods in the event that President Trump raises tariffs on EU goods if no trade deal with the US is reached by August 1.
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 -0.05%. The yen rose to a 1.5-week high against the dollar today after the US and Japan reached a trade agreement. The yen also garnered support today on hawkish comments from BOJ Deputy Governor Uchida, which pushed the 10-year JGB bond yield up to a 16-year high of 1.616%. This was prompted by his statement that the trade deal between the US and Japan brings the BOJ closer to raising interest rates. Higher T-note yields today are limiting gains in the yen.
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 in Sunday's elections may lead to fiscal deterioration in Japan's government finances, as the government boosts spending and implements tax cuts.
BOJ Deputy Governor Uchida said "uncertainty has receded" after a trade deal was made with Japan and the US, which will push the BOJ closer to a rate hike by boosting the prospects for suitable economic conditions.
President Trump late Tuesday announced a trade deal with Japan that will impose 15% tariffs on US imports from Japan, lower than the 25% rate that had been previously flagged to start on August 1, while creating a $550 billion fund for Japan to make investments in the US. Japan also agreed to purchase 100 Boeing aircraft, increase its purchases of US rice by 75%, and buy $8 billion in other agricultural products, while raising its defense spending with American firms to $17 billion annually, from $14 billion.
August gold (GCQ25) today is down -21.2 (-0.62%), and September silver (SIU25) is up +0.200 (+0.51%). Precious metals today are mixed, with Sep silver posting a contract high and nearest-futures (N25) silver posting a 14-year high.
Gold prices fell from a 5-week high today and turned lower as global trade tensions eased after the US and Japan agreed to a trade deal. Dollar strength today and higher global bond yields are also weighing on precious metals. Hawkish comments today from BOJ Deputy Governor Uchida undercut precious metals when he said the trade deal between Japan and the US pushes the BOJ closer to a rate hike. Silver prices fell back from their best levels after US existing home sales fell more than expected to a 9-month low, a negative factor for industrial metals demand.
Precious metals continue to receive safe-haven support from geopolitical risks, including the conflicts in Ukraine and the Middle East. Fund buying of precious metals continues to support prices after gold holdings in ETFs rose to a two-year high on Tuesday, and silver holdings in ETFs climbed to a three-year high on Tuesday.
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.
