The dollar index (DXY00) on Wednesday fell by -0.07%. The dollar Wednesday posted modest losses for a second day. The dollar was under pressure Wednesday after economic news from ADP showed U.S. private employers in Aug added the fewest jobs in 19 months. Also, Wednesday’s news showing record-high inflation in the Eurozone in August pushed European government bond yields higher, strengthening the euro’s interest rate differentials and pushing EUR/USD higher.
Tuesday’s U.S. economic news was mixed for the dollar. On the bearish side, the Aug ADP employment change rose +132,000, weaker than expectations of +300,000 and the smallest increase in 19 months. Conversely, the Aug MNI Chicago PMI unexpectedly rose +0.1 to 52.2, stronger than expectations of no change at 52.1.
Comments on Wednesday from Cleveland Fed President Mester were hawkish for Fed policy and bullish for the dollar when she said, "her current view is that it will be necessary to move the fed funds rate up to somewhat above 4% by early next year and hold it there and that she does not anticipate the Fed cutting the fed funds rate target next year."
EUR/USD (^EURUSD) on Wednesday rose by +0.35%. Expectations for the ECB to raise interest rates by 75 bp at next week’s policy meeting supported gains in the euro today. Record high inflation in the Eurozone and hawkish ECB comments Wednesday also pushed the 10-year German bund yield to a 2-month high of 1.586%, which supports the euro’s interest rate differentials. In addition, the euro garnered support from falling nat-gas prices that ease concerns about an energy crisis after European nat-gas prices dropped more than -5% Wednesday to a 1-1/2 week low.
ECB Governing Council member and Bundesbank President Nagel said he sees a risk that high inflation will persist even longer and that the ECB needs a "strong" interest rate hike in September.
Eurozone Aug CPI rose a record +9.1% y/y, stronger than expectations of+9.0% y/y. Likewise, the Aug core CPI rose a record +4.3% y/y, stronger than expectations of +4.1% y/y.
USD/JPY (^USDJPY) on Wednesday rose by +0.02%. The yen was under pressure Wednesday from higher T-note yields after the 10-year T-note yield climbed t a 2-month high. However, losses in the yen were limited due to signs of strength in Japan’s economy after Wednesday’s economic news on industrial production, retail sales, and consumer confidence came in stronger than expected.
The Japan Aug consumer confidence index unexpectedly rose +2.3 to 32.5, stronger than expectations of a decline to 29.5.
Japan July industrial production unexpectedly rose +1.0% m/m, stronger than expectations of a decline of -0.5% m/m.
Japan July retail sales rose +0.8% m/m, stronger than expectations of +0.3% m/m.
October gold (GCV22) Wednesday closed down -10.00 (-0.58%), and September silver (SIU22) closed down -0.397 (-2.19%). Gold and silver prices Wednesday moved lower for the fourth consecutive session, with gold dropping to a 1-1/4 month low and silver falling to a 2-year low. Hawkish central bank comments Wednesday pushed global bond yields higher and undercut metals prices. Also, continued liquidation from funds weighs on gold prices after long gold positions in ETFs fell to a 6-month low Tuesday. A weaker dollar Wednesday limited losses in precious metals.
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