The dollar index (DXY00) today is down by -0.05% and posted a new 3-week low. Strength in the euro today is weighing on the dollar as political tensions in France eased after Sunday’s elections showed a defeat for the far-right party.
The markets are discounting the chances for a -25 bp rate cut at 7% for the July 30-31 FOMC meeting
and 76% for the following meeting on Sep 17-18.
EUR/USD (^EURUSD) today is up by +0.03% and posted a 3-1/2 week high. The euro recovered from overnight losses and is slightly higher on reduced political tensions in France. Sunday’s parliamentary elections in France produced a divided parliament with no clear majority, making it less likely that any extreme policy measures can be passed. Also, hawkish comments from ECB Governing Council member Muller boosted the euro when he said the ECB can’t rush with cutting interest rates as wage growth remains elevated.
The euro today initially moved lower on today’s news that showed the Eurozone July Sentix investor confidence index fell more than expected to a 4-month low, and German trade news for May was weaker than expected.
The Eurozone July Sentix investor confidence index fell -7.6 to a 4-month low of -7.3, weaker than expectations of -0.5.
German May exports fell -3.6% m/m, weaker than expectations of -2.8% m/m and the biggest decline in 5 months. May imports fell -6.6% m/m, weaker than expectations of -1.0% m/m and the biggest decline in 17 months.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 5% for the July 18 meeting and 72% for the September 12 meeting.
USD/JPY (^USDJPY) today is down by -0.10%. The yen today rose to a 1-1/2 week high against the dollar. Signs of strong wage growth in Japan are hawkish for BOJ policy and supportive for the yen after Japan’s May labor cash earnings rose by the most in 11 months. The yen also garnered support from today’s stronger-than-expected Japan Jun eco watchers outlook survey. Higher T-note yields today are limiting the upside of the yen.
Japan's May labor cash earnings rose +1.9% y/y, the biggest increase in 11 months but below expectations of +2.1% y/y.
The Japan Jun eco watchers outlook survey rose +1.6 to 47.9, stronger than expectations of 46.5.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 58% for the July 31 meeting and 41% for the September 20 meeting.
August gold (GCQ4) today is down -16.80 (-0.70%), and September silver (SIU24) is down -0.344 (-1.09%). Precious metals prices today are moderately lower. Safe-haven demand for precious metals receded today as European stocks rallied after Sunday’s parliamentary elections in France resulted in a hung parliament, which makes it less likely that extreme policies by the far-right party can be implemented. Reduced central bank buying of gold also weighs on prices after the People’s Bank of China didn’t add gold to its reserves for a second consecutive month in June. Silver prices were also weighed down on signs of weakness in the German economy that are negative for industrial metals demand after German trade news for May was weaker than expected. A weaker dollar today is limiting losses in precious metals.
More Forex News from Barchart
- Dollar Ends Lower as US Jobs Report Boosts Fed Rate Cut Chances
- Stocks Supported as US Jobs Report Bolsters Rate Cut Speculation
- Dollar Falls as US Payroll Report Bolsters the Odds for Fed Rate Cuts
- Stocks Rally as US June Payroll Report Boosts Rate Cut Chances
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.
