The dollar index (DXY00) today is down by -0.08%. The dollar is under pressure today from lower T-note yields. Also, signs of progress in peace talks over Ukraine are boosting EUR/USD at the expense of the dollar. Losses in the dollar are limited due to concern that last week's stronger-than-expected July CPI and PPI reports could keep the Fed from cutting interest rates at next month's FOMC meeting.
Today's US housing news was mixed for the dollar. US Jul housing starts unexpectedly rose +5.2% m/m to a 5-month high of 1.428 million, stronger than expectations of a decline to 1.297 million. However, Jul building permits, a proxy for future construction, fell -2.8% m/m to a 5-year low of 1.354 million, weaker than expectations of -0.5% m/m to 1.386 million.
The dollar garnered some support today after S&P Global Ratings affirmed its AA+ long-term rating and A-1+ short-term rating on US debt and said the US can maintain its credit strength despite the fiscal hit of its recent spending bill because tariff revenues will "generally offset weaker fiscal outcomes."
The markets are awaiting the ongoing meeting between President Trump and European leaders on any progress toward ending the Russian-Ukrainian war. The outcome could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security.
The markets continue to adjust to the inflation outlook following Thursday's hawkish PPI report. Following the report, the markets erased any hopes of a -50 bp rate cut at the Fed's September meeting and pulled back expectations for a -25 bp rate cut to 84% area from 93% before the report.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 84% at the September 16-17 FOMC meeting and at 53% for a second -25 bp rate cut at the following meeting on October 28-29.
EUR/USD (^EURUSD) today is up by +0.05%. The euro is moving slightly higher today on signs of progress in peace talks over Ukraine. US and European officials said they will immediately work on providing Ukraine with robust security guarantees to open a path for a meeting between Presidents Putin and Zelenskiy.
Swaps are pricing in a 6% chance of a -25 bp rate cut by the ECB at the September 11 policy meeting.
USD/JPY (^USDJPY) today is down by -0.17%. Higher Japanese government bond yields today have strengthened the yen's interest rate differentials and are boosting the yen after the 10-year JGB bond yields rose to a 3-week high of 1.604%. Also, lower T-note yields today are supportive of the yen. Gains in the yen are limited by concern that US tariff policies will harm the Japanese economy.
December gold (GCZ25) today is up +0.40 (+0.01%), and September silver (SIU25) is down -0.129 (-0.34%). Precious metal prices today are mixed. Today's dollar weakness is bullish for metals prices. Also, lower T-note yields today are supportive of precious metals. Gold continues to have safe-haven support related to US tariffs and 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 2-year high last Friday, and silver holdings in ETFs reached a 3-year high Monday.
Gains in precious metals are limited today as signs of progress in peace talks over Ukraine have curbed some safe-haven demand for precious metals. US and European officials said they will immediately work on providing Ukraine with robust security guarantees to open a path for a meeting between Presidents Putin and Zelenskiy. Also, reduced chances for a Fed rate cut at next month's FOMC meeting are bearish for precious metals, following a bearish July PPI report last Thursday that knocked the chance of a Fed rate cut down to 84% from 93% before the report.
Silver prices gave up an early advance and turned lower on demand concerns for industrial metals after US Jul building permits, a proxy for future construction, fell more than expected to a 5-year low.
