The dollar index (DXY00) today is up by +0.22%. The dollar is climbing today on an increase in liquidity demand for the dollar as stocks fell after President Trump downplayed the chance of an early end to the Israel-Iran war. However, the dollar fell back from its best level after US May retail sales fell more than expected, and the June NAHB housing market index unexpectedly fell to a 2-1/2-year low. The dollar continues to be undercut by expectations of weaker US economic growth and reduced foreign investment in the US caused by President Trump's tariffs.
US May retail sales fell -0.9% m/m, weaker than expectations of -0.6% m/m. May retail sales ex-autos unexpectedly fell -0.3% m/m versus expectations of a +0.2% m/m increase.
The US May import price index ex-petroleum rose +0.2% m/m, slightly stronger than expectations of +0.1% m/m.
The US Jun NAHB housing market index unexpectedly fell -2 to a 2-1/2 year low of 32, weaker than expectations of an increase to 36.
President Trump played down the chance of a ceasefire in the Israel-Iran war when he said that he hasn't reached out to Iran for peace talks "in any way, shape or form" and that a "permanent end and not a ceasefire" to the nuclear dispute with Iran would be the goal.
The markets are discounting the chances at 0% for a -25 bp rate cut after the Tue-Wed FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.11%. The euro is under modest pressure today due to a stronger dollar. Also, dovish comments today from ECB Governing Council member Stournaras weighed on the euro when he said the ECB may proceed with additional interest rate cuts if economic growth and inflation slow more than expected. Losses in the euro are limited after the German Jun ZEW survey expectations of economic growth rose more than expected.
The German Jun ZEW survey expectations of economic growth index rose +22.3 to 47.5, stronger than expectations of 35.0.
ECB Governing Council member Stournaras said the ECB has found "equilibrium" on interest rates, inflation, and economic growth, but "if the Eurozone economy weakens further, if inflation decreases further below the target, then we may proceed to further rate cuts."
Swaps are discounting the chances at 7% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) today is up by +0.13%. The yen gave up overnight gains and turned lower after the BOJ kept interest rates unchanged as expected and after BOJ Governor Ueda said he couldn't comment on the possibility of a rate hike coming in the near term. The yen initially moved higher against the dollar today on increased safe-haven demand after President Trump downplayed the possibility of an early end to the Israel-Iran war. Also, today's action by the BOJ to cut its bond purchases for Q3 was supportive of the yen. In addition, lower T-note yields today are bullish for the yen.
As expected, the BOJ voted 9-0 to keep its benchmark interest rate unchanged at 0.50% and voted to cut its Q3 monthly bond purchases to 3.705 trillion yen from 4.105 trillion yen in Q2. The BOJ also announced it will trim its monthly bond purchases from April 2026 at a quarterly pace of 200 billion yen ($1.3 billion) from the current 400 billion yen.
BOJ Governor Ueda said he can't comment on the possibility of a rate hike coming in the near term, and any move in interest rates will hinge on the BOJ's assessment of the economic data.
August gold (GCQ25) today is down -11.30 (-0.33%), and July silver (SIN25) is up +0.692 (+1.90%). Precious metals today are mixed, with silver soaring to a 13-year high. Today's dollar strength is negative for precious metals. Gold prices were also pressured after the BOJ announced it was cutting its bond purchases for Q3.
Precious metals have safe-haven support from Middle East hostilities after President Trump today downplayed the chance of an early end to the Israel-Iran war. Also, lower global bond yields today are supportive of precious metals. In addition, global trade uncertainty is boosting safe-haven demand for precious metals after President Trump indicated last Wednesday that he is moving ahead with his reciprocal tariffs. Gold garnered some support today as an inflation hedge after the US 10-year breakeven inflation rate rose to a 1-week high.
Silver garnered support today after US May manufacturing production rose as expected, and after the German Jun ZEW survey expectations of economic growth rose more than expected, positive factors for industrial metals demand. Silver prices added to their gains today on technical buying after prices posted a new 13-year high.
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.
