The dollar index (DXY00) today is down by -0.12%. The dollar fell from a 1-week high today and turned lower on political risks and concerns about Fed independence after President Trump called for Fed Governor Lisa Cook to resign amid a probe into two personal mortgages. FHFA Director Pulte wrote a letter to Attorney General Bondi suggesting Ms. Cook may have committed a criminal offense by allegedly falsifying bank documents and property records to acquire more favorable loan terms.
The dollar initially moved higher today after EUR/USD fell to a 1-week low when ECB President Lagarde said she sees slower growth in the Eurozone. The weakness in stocks today has also boosted some liquidity demand for the dollar. In addition, the dollar has support due to speculation that last week’s stronger-than-expected July PPI report could keep the Fed from cutting interest rates at next month’s FOMC meeting, as expectations for a -25 bp Fed rate cut in September fell to 84% area from 93% before the report.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 84% at the September 16-17 FOMC meeting and at 55% for a second -25 bp rate cut at the following meeting on October 28-29.
EUR/USD (^EURUSD) today is up by +0.09%. The euro recovered from a 1-week low today and turned higher after the dollar retreated when President Trump said Fed Governor Lisa Cook “must resign” now due to allegations of mortgage fraud.
The euro initially moved lower today on comments from ECB President Lagarde, who said the Eurozone economy is likely to see slower growth this quarter, with questions over global trade remaining despite recent trade deals with the US reducing uncertainty.
President Trump is pushing for a summit between Presidents Putin and Zelenskiy soon, and European leaders are discussing a plan to send British and French troops to Ukraine as part of a peace agreement. The outcome could have macroeconomic implications regarding tariffs and oil prices, and could, of course, have significant consequences for European security.
Swaps are pricing in a 7% chance of a -25 bp rate cut by the ECB at the September 11 policy meeting.
USD/JPY (^USDJPY) today is down by -0.35%. The yen is climbing today due to weakness in the dollar. Also, higher Japanese government bond yields have strengthened the yen’s interest rate differentials and boosted the yen after the 10-year JGB bond yield rose to a 16-year high today of 1.621%. In addition, lower T-note yields on Tuesday were supportive of the yen. Today’s Japanese economic news was mixed for the yen as Jun core machine orders unexpectedly increased, but July exports posted their largest decline in almost 4.5 years.
Japanese trade news was mixed as Jul exports fell -2.6% y/y, weaker than expectations of -2.1% y/y and the largest decline in almost 4.5 years. However, Jul imports fell -7.5% y/y, a smaller decline than expectations of -10.0% y/y.
Japan Jun core machine orders unexpectedly rose +3.0% m/m, stronger than expectations of a decline of -0.5% m/m.
December gold (GCZ25) today is up +27.30 (+0.81%), and September silver (SIU25) is up +0.378 (+1.01%). Precious metal prices recovered from early losses today and moved higher due to a weaker dollar and lower T-note yields. Also, an increase in US political uncertainty and concerns about Fed independence has boosted safe-haven demand for precious metals after President Trump called for Fed Governor Lisa Cook to resign amid allegations of mortgage fraud. Gold continues to have safe-haven support related to US tariffs and geopolitical risks, including the conflicts in Ukraine and the Middle East. Fund buying of precious metals continues to support prices after gold holdings in ETFs rose to a 2-year high last Friday, and silver holdings in ETFs reached a 3-year high on Tuesday.
Precious metals initially moved lower today as signs of progress in peace talks over Ukraine have curbed some safe-haven demand. Also, today’s hawkish UK July CPI report may keep the BOE from cutting interest rates and is bearish for precious metals. Silver prices were undercut today due to concerns over industrial metal demand after ECB President Lagarde said the Eurozone economy is likely to see slower growth this quarter.
UK Jul CPI rose +3.8% y/y, stronger than expectations of +3.7% y/y and the fastest pace of increase in 1.5 years. Jul core CPI also rose +3.8% y/y, stronger than expectations of +3.7% y/y.
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. This article was originally published on Barchart.com
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