Dollar Pressured by Strength in Stocks and Lower Crude Prices

The dollar index (DXY00) is down by -0.06% today.  The dollar is under pressure today as hopes for a deal to reopen the Strait of Hormuz have boosted stocks and knocked crude oil prices sharply lower.  The slide in crude oil prices lowers inflation expectations and could prompt the Fed to loosen monetary policy, a negative factor for the dollar.  Today's weaker-than-expected US economic reports on June JOLTS job openings and June factory orders are also weighing on the dollar.  

The US June trade deficit was -$73.3 billion, slightly larger than expectations of -$73.0 billion.

US June factory orders unexpectedly fell -0.3% m/m, weaker than expectations of +0.2% m/m.  Also, June factory orders ex-transportation unexpectedly fell -0.4% m/m versus expectations of +0.4% m/m and the biggest decline in 14 months.

US June JOLTS job openings fell -178,000 to 7.359 million, showing a weaker labor market than expectations of 7.454 million.

The markets are discounting a 59% probability of a +25 bp rate hike at the next FOMC meeting on September 15-16.

EUR/USD (^EURUSD) is up by +0.16% today.  The euro is slightly higher today amid weakness in the dollar.  Also, today's -2% fall in crude oil prices to a 3-week low is supportive for the Eurozone economy and the euro, as Europe imports most of its energy. 

The markets are discounting an 85% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

USD/JPY (^USDJPY) is up by +0.18% today.  The yen is moving lower today, giving back some of the recent sharp rally that took it to a 2.75-month high against the dollar on Monday.  Losses in the yen are limited after crude oil prices fell more than -5% today to a 3-week low, which is bullish for Japan's economy and the yen as Japan imports more than 90% of its energy.  Also, lower T-note yields today are supportive of the yen.

Comments today from US Treasury Secretary Scott Bessent were bullish for the yen when he signaled the US will continue joint intervention in the forex market in support of the yen, saying, "We will do whatever it takes" to support Japan. 

The yen continues to suffer from weak interest rate differentials, with markets discounting only a 49% chance of a +25 bp BOJ rate hike at the September 18 policy meeting. The BOJ's current policy rate of 1.00% is well below the Fed's federal funds rate target of 3.50%-3.75%.

October COMEX gold (GCV26) today is up +49.30 (+1.21%), and September COMEX silver (SIU26) is up +1.919 (+3.23%).

Gold and silver prices are sharply higher today, with silver posting a 1-week high.  Slumping crude oil prices are boosting precious metals today.  WTI crude is down more than -5% at a 3-week low, which lowers inflation expectations and could persuade global central banks to loosen their monetary policies, a bullish factor for metals.  Also, lower T-note yields today are supportive of precious metals.

Silver prices also have carryover support from today's surge in copper prices to a 2-month high. Copper prices are soaring as LME copper inventories dropped to a 5-month low on an increase in US copper imports. More than 200,000 MT of copper arrived at US ports in July, the largest monthly volume in data going back to 2014, as US importers hoard copper ahead of President Trump's decision on tariffs on refined copper imports.  The influx of US copper imports has tightened supplies of copper to the rest of the world. 

Recent fund liquidation of precious metals is bearish for prices, as long holdings in gold ETFs fell to a 10-month low last Monday, after reaching a 3.5-year high on February 27.  Also, long holdings in silver ETFs fell to a 1-year low on July 14 from the 3.5-year high posted on December 23.

Strong central bank demand for gold is supportive of gold prices, following news that bullion held in China's PBOC reserves rose by +480,000 ounces to 75.44 million troy ounces in June, the twentieth consecutive month the PBOC boosted its gold reserves.