The dollar index (DXY00) today is down by -0.41% at a 1-week low. The dollar retreated after President Trump announced a tentative ceasefire between Israel and Iran, which curbed safe-haven demand for the dollar. Also, today's rally in stocks has reduced liquidity demand for the dollar. The dollar weakened further today after an unexpected decline in the Conference Board US June consumer confidence index.
Losses in the dollar are contained due to hawkish commentary from Fed Chair Powell and Atlanta Fed President Bostic, who said they are in no hurry to cut interest rates.
The US Apr S&P CoreLogic composite-20 home price index rose +3.42% y/y, weaker than expectations of +3.90% y/y and the smallest increase in 1-3/4 years.
The Conference Board US Jun consumer confidence index unexpectedly fell -5.4 to 93.0, weaker than expectations of an increase to 99.8.
The US June Richmond Fed manufacturing conditions survey unexpectedly rose +2 to -7, stronger than expectations of a decline to -10.
Comments from Fed Chair Powell signal he is no rush to cut interest rates when he said, "The effects of tariffs will depend, among other things, on their ultimate level, and for the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."
Atlanta Fed President Bostic said the Fed doesn't need to cut interest rates, with companies planning to raise prices later this year in response to higher import taxes and with the job market still stable.
The markets are discounting the chances at 17% for a -25 bp rate cut after the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.33% and posted a 1-1/2 week high. Today's dollar weakness is benefiting the euro. The euro was also boosted by news that theGerman Jun IFO business climate index rose to a 13-month high. In addition, today's increase in the 10-year German bund yield to a 1-week high strengthened the euro's interest rate differentials. Dovish comments today from ECB Governing Council member Villeroy de Galhau are limiting gains in the euro, as he stated that the ECB can still cut interest rates within the next six months.
The German Jun IFO business climate index rose +0.9 to a 13-month high of 88.4, stronger than expectations of 88.0.
ECB Governing Council member Villeroy de Galhau said. "If we look at the present assessment of markets so far, inflation expectations remain moderate. If that was confirmed, it could possibly lead in the next six months to further accommodation."
Swaps are discounting the chances at 8% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) today is down by -0.99%. The yen is climbing today on optimism that falling energy costs will boost the Japanese economy after crude prices dropped more than -3% to a 1-1/2 week low. The yen is also finding support today from the dollar's weakness.
August gold (GCQ25) today is down -75.10 (-2.21%), and July silver (SIN25) is down -0.837 (-2.31%). Precious metals today are sharply lower, with gold sliding to a 2-week low. An easing of geopolitical risks has sparked a rally in global equity markets and prompted long liquidation pressures in precious metals today on the announcement of a ceasefire in the Israel-Iran conflict. Precious metals added to their losses today on hawkish comments from Fed Chair Powell and Atlanta Fed President Bostic, who signaled the Fed is in no hurry to cut interest rates.
On the positive side for precious metals is today's slide in the dollar to a 1-week low. Also, dovish comments today from ECB Governing Council member Villeroy de Galhau were supportive of precious metals when he said the ECB could still cut interest rates further within the next six months. Fund buying of gold continues to support prices as gold holdings in ETFs rose to a 1-3/4 year high Monday.
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.
