The dollar index (DXY00) today is up by +0.33% at a 2-week high. The dollar is garnering support today from weakness in the Canadian dollar, which fell to an 8-1/2 month low against the dollar, and weakness in the British pound, which fell to a 3-1/2 week low against the dollar. A decline in T-note yields today is limiting the strength of the dollar.
The markets are discounting the chances for a -25 bp rate cut at 4% for this week’s Tue/Wed FOMC meeting and 100% for the following meeting on Sep 17-18 if the FOMC does not cut rates this week.
EUR/USD (^EURUSD) today is down by -0.41% and fell to a 2-1/2 week low. Today’s dollar strength is weighing on the euro. Also, the euro is being undercut by the rise in the market odds for an ECB rate cut at its next meeting in September to the current level of 92% from 75% last Monday.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 92% for the September 12 meeting.
USD/JPY (^USDJPY) today is up by +0.23%. The yen today is moderately lower after the Nikkei Stock Index rallied more than +2%, curbing safe-haven demand for the yen. Losses in the yen are limited on speculation the BOJ will announce that it will cut its monthly bond purchases at the conclusion of Wednesday’s 2-day policy meeting. Short-covering is also boosting the yen due to today’s decline in T-note yields.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 59% for Thursday’s meeting and 100% for the September 20 meeting if there is no rate hike at the July 31 meeting.
August gold (GCQ24) today is up +9.30 (+0.39%), and September silver (SIU24) is up +0.030 (+0.11%). Precious metals today are moderately higher. Today’s decline in global bond yields is bullish for precious metals prices. Short covering is also boosting precious metals today ahead of this week’s monetary policy meetings from the BOJ, the Fed, and the BOE. Gold also has support after long gold holdings in ETFs rose to a 5-month high of 2,568 metric tons last Friday.
Today’s rally in the dollar index to a 2-week high limits gains in metals prices. Also, reduced gold demand from China is negative for prices after the China Gold Council reported total demand for gold bullion in China in the first half of 2024 fell -6% y/y to 524 MT. In addition, today’s decline in the US 10-year breakeven inflation rate to a 2-week low has reduced demand for gold as an inflation hedge.
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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.
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