The dollar decreases as stocks rise and T-notes decrease

The dollar index (DXY00) fell -0.65% on Monday, hitting a weekly low. The dollar, which retreated on Monday as a rally in the S&P 500, reduced liquidity demand for the dollar. The drop in T-Note yields on Monday also put pressure on the dollar.

Key economic indicators for the US June fell 0.3% m/m, as expected.

Futures prices for federal funds are discounting the possibility of a -25 bp rate reduction at 3% at the FOMC meeting on July 29-30 and at 58% at the next September 16-17 meeting.

EUR/USD (^EURUSD) increased by +0.58% on Monday. The euro rose on Monday due to weakness in the dollar. And expectations that the ECB will be closer to the end of its easing cycle than the Federal Reserve are increasing the euro as the ECB has cut interest rates four times this year. Furthermore, US trade policies encourage foreign investors to move from dollar-controlled assets to euro-denominated assets.

The euro’s profits are limited due to concerns that President Trump is pushing for a minimum tariff of 15%-20% in his trade contract with the European Union. The higher the tariff rate on EU goods, the weaker the eurozone economy. This is the euro bearish.

The swap is priced at Thursday’s policy meeting with a 2% chance of a -25 bp rate reduction by the ECB.

USD/jpy (^usdjpy) fell by -0.99% on Monday. Isba gathered against the dollar on Monday after Prime Minister Isba said he would take over as leader despite the loss of his majority after Sunday’s Senate election. As the Japanese market has been closed for Marine Corps Day holidays, Monday’s move in the yen could be overkill due to sub-average trading.

The benefits of the short-term yen could be limited due to concerns that LDP in Japan’s Senate could lead to financial degradation of Japanese government finances as the government promotes spending and implements tax cuts.

The Japanese ruling Liberal Democrats (LDP) lost a majority in the Senate after Sunday’s election, with the LDP party winning only 47 seats.

On Monday, August gold (GCQ25) reached +48.10 (+1.43%), while September silver (SIU25) closed +0.870 (+2.26%). Precious metals settled sharply on Monday, with gold reaching a four-week high. The weakness of the dollar and low World Government bond yields on Monday were bullish for precious metals. Precious Metals have also received carryover support since last Friday when Fed Governor Waller expressed support for the Fed’s interest rate cuts at the FOMC meeting on July 29th-30th. Additionally, precious metals are gaining safe support from global trade tensions following the announcement last Wednesday that President Trump intends to send tariff letters to more than 150 countries, informing him that tariff rates are 10% or 15%, and that could come into effect on August 1.

On the date of publication, Rich Asplund had no position (directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published barchart.com