Rich Asplund
4 min read
The dollar index (DXY00) today is up by +0.06% at a 3-week high. The dollar is climbing today after the weekend attack by the US on Iran's nuclear facilities boosted safe-haven demand for the dollar. The dollar also found support from the stronger-than-expected US PMI and existing home sales reports. However, the dollar gave up most of its advance on dovish comments from Fed Governor Bowman, who said she favored a Fed rate cut at next month's FOMC meeting.
The June S&P US manufacturing PMI was unchanged at 52.0, stronger than expectations of a decline to 51.0.
US May existing home sales unexpectedly rose +0.8% m/m to 4.03 million versus expectations of a -1/3% m/m decline to 3.95 million.
Fed Governor Bowman said, "Should inflation pressures remain constrained, I would support lowering the fed funds policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market."
The markets are discounting the chances at 25% for a -25 bp rate cut after the July 29-30 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.02%. The euro is slightly lower today due to a stronger dollar. Also, today's weaker-than-expected Eurozone June PMI reports were bearish for the euro. In addition, dovish comments today from ECB Governing Council member Centeno undercut the euro when he said the Eurozone economy needs more ECB stimulus. The euro recovered most of its losses when the dollar gave up most of its advance on dovish comments from Fe Governor Bowman,
The June S&P Eurozone manufacturing PMI was unchanged at 49.4, weaker than expectations of an increase to 49.7. Also, the June S&P Eurozone composite PMI was unchanged at 50.2, weaker than expectations of an increase to 50.4.
ECB Governing Council member Centeno said, "The supply and demand conditions are still too weak in the Eurozone to allow a return to the 2% inflation target without further stimulus."
Swaps are discounting the chances at 6% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) today is up by +0.40%. The yen tumbled to a 1-1/4-month low against the dollar today on concern that rising energy costs will derail Japan's economy after the escalation of Middle East hostilities pushed crude prices up to a 5-1/4 month high. The yen also fell after Japanese officials denied a Financial Times report that said the US asked Japan to raise its defense spending to 3.5% of annual GDP.
