The dollar index (DXY00) today is up by +0.06% at a 3-week high. The dollar is climbing today after the weekend attack by the US on Iran’s nuclear facilities boosted safe-haven demand for the dollar. The dollar also found support from the stronger-than-expected US PMI and existing home sales reports. However, the dollar gave up most of its advance on dovish comments from Fed Governor Bowman, who said she favored a Fed rate cut at next month’s FOMC meeting.
The June S&P US manufacturing PMI was unchanged at 52.0, stronger than expectations of a decline to 51.0.
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US May existing home sales unexpectedly rose +0.8% m/m to 4.03 million versus expectations of a -1/3% m/m decline to 3.95 million.
Fed Governor Bowman said, "Should inflation pressures remain constrained, I would support lowering the fed funds policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market."
The markets are discounting the chances at 25% for a -25 bp rate cut after the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.02%. The euro is slightly lower today due to a stronger dollar. Also, today's weaker-than-expected Eurozone June PMI reports were bearish for the euro. In addition, dovish comments today from ECB Governing Council member Centeno undercut the euro when he said the Eurozone economy needs more ECB stimulus. The euro recovered most of its losses when the dollar gave up most of its advance on dovish comments from Fe Governor Bowman,
The June S&P Eurozone manufacturing PMI was unchanged at 49.4, weaker than expectations of an increase to 49.7. Also, the June S&P Eurozone composite PMI was unchanged at 50.2, weaker than expectations of an increase to 50.4.
ECB Governing Council member Centeno said, "The supply and demand conditions are still too weak in the Eurozone to allow a return to the 2% inflation target without further stimulus."
Swaps are discounting the chances at 6% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) today is up by +0.40%. The yen tumbled to a 1-1/4-month low against the dollar today on concern that rising energy costs will derail Japan's economy after the escalation of Middle East hostilities pushed crude prices up to a 5-1/4 month high. The yen also fell after Japanese officials denied a Financial Times report that said the US asked Japan to raise its defense spending to 3.5% of annual GDP.
The yen garnered some support from today's Japanese economic news that showed the June Jibun Bank Japanese manufacturing PMI expanded at its fastest pace in 13 months. Also, the Japan Finance Ministry’s cut in its long-term bond sales was supportive for the yen. In addition, lower T-note yields today are bullish for the yen.
The June Jibun Bank Japan manufacturing PMI rose +1.0 to 50.4, the highest level in 13 months.
The Japanese Finance Ministry said it will reduce the volume of 20-year, 30-year, and 40-year bonds sold in auctions by a combined 3.2 trillion yen ($21.7 billion) starting in July through the end of March 2026.
August gold (GCQ25) today is up +7.80 (+0.23%), and July silver (SIN25) is up +0.223 (+0.62%). Precious metals today are moving higher after the US launched attacks over the weekend on Iran's nuclear facilities, escalating tensions in the Middle East and prompting some safe-haven demand for precious metals. Lower global bond yields today are also supportive of precious metals. In addition, dovish central bank comments today are boosting demand for precious metals as a store of value. Fed Governor Bowman said she supports a Fed rate cut at next month's policy meeting, and ECB Governing Council member Centeno said the Eurozone economy needs more ECB stimulus. Fund buying of gold and silver continues to support prices. Gold holdings in ETFs rose to a 1-3/4 year high last Friday, and silver holdings in ETFs rose to a 2-3/4 year high.
Today's rally in the dollar index to a 3-week high is limiting the upside in precious metals. Also, a lack of retaliation thus far by Iran to the weekend attacks by the US on Iran's nuclear facilities has reduced safe-haven demand for precious metals.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
