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Headlines
- Dollar Index Slips Amid British Pound Surges
- US Economic Data Mixed; Safe-Haven Demand Strengthens Dollar
- Euro and Yen Gain as Geopolitical Tensions Rise
The dollar index (DXY) shows a minor dip of -0.07% today as the British pound (^GBPUSD) reaches a 2-1/3 year high. This uptick in the pound exerts downward pressure on the dollar. However, higher U.S. Treasury note yields are providing some support to the dollar. Additionally, heightened geopolitical risks in the Middle East continue to drive safe-haven demand for the dollar. U.S. economic reports present a mixed picture for the dollar's performance and financial stocks.
The June SP CoreLogic US composite-20 home price index growth eased to +6.47% y/y, down from +6.88% y/y in May but still above the forecast of +6.14% y/y. Conversely, the Conference Board’s August consumer confidence index increased by +1.4 to a six-month high of 103.3, surpassing the expected 100.7.
The August Richmond Fed manufacturing survey saw a surprising decline, with current conditions falling -2 to a four-year low of -19, contrary to expectations of an increase to -14.
Market expectations are factoring in a 100% chance of a -25 basis point rate cut at the September 17-18 FOMC meeting, with a 27% chance of a -50 basis point cut.
The euro (EUR/USD) experiences a slight increase due to dollar weakness, alongside support from a rise in the 10-year German bund yield to a three-and-a-half-week high. However, gains are moderated by the unexpected drop in the German September GfK consumer confidence index to a four-month low. Dovish comments from ECB officials Centeno and Knot also put a damper on the euro, as they support easing ECB monetary policy.
The German September GfK consumer confidence index fell -3.4 to a four-month low of -22.0, against the anticipated increase to -18.2. ECB Governing Council members Centeno and Knot have indicated support for gradual monetary easing, contingent on inflation trends.
The yen (USD/JPY) is down -0.17% today, slightly benefiting from safe-haven demand amid Middle Eastern geopolitical tensions. Central bank policy divergence is also impacting the yen, with the BOJ expected to continue raising interest rates while the Fed and ECB lean towards rate cuts.
Japan’s July PPI services prices softened to +2.8% y/y from +3.1% y/y in June, falling short of the +2.9% y/y forecast. Market expectations for a +10 basis point BOJ rate hike at the September 20 meeting are at 0%, with a 9% chance for the October 30-31 meeting.
Precious metals show moderate losses today, with December gold (GCZ24) down -0.34% and September silver (SIU24) down -0.41%. Although global bond yields are weighing on precious metals, the weaker dollar offers some support. Safe-haven demand for precious metals remains strong due to escalating Middle East tensions, following recent airstrikes by Israel in southern Lebanon.
