The dollar index (DXY00) today is down by -0.32%. The dollar is sliding today amid weakness in crude oil prices. WTI crude oil is down more than 3% today, easing inflation expectations and potentially persuading the Fed to ease monetary policy, a negative factor for the dollar. Losses in the dollar accelerated today after the University of Michigan’s US Jun consumer sentiment index came in weaker than expected. The weakness in stocks today is limiting losses in the dollar, as weak stocks have boosted some liquidity demand for the dollar.
US May wholesale inventories rose +0.3% m/m, weaker than expectations of +0.4% m/m. May retail inventories rose +0.6% m/m, stronger than expectations of +0.5% m/m.
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The University of Michigan US Jun consumer sentiment index was revised upward by 0.6 to 49.5, below expectations of 50.0.
The University of Michigan US Jun 1-year inflation expectations were left unrevised at 4.6%, and the Jun 5-10 year inflation expectations were revised downward by -0.1 to 3.3% from 3.4%, right on expectations.
The swaps markets are discounting the odds at 30% for a +25 bp rate cut hike at the next FOMC meeting on July 28-29.
EUR/USD (^EURUSD) today is up by +0.47%. The weaker dollar today is supporting gains in the euro. Also, today’s -3% plunge in crude oil prices is bullish for the Eurozone economy and the euro as Europe imports most of its energy. Today’s ECB inflation expectations news was mixed for the euro, with shorter-term expectations falling but longer-term expectations remaining steady.
The ECB’s May 1-year CPI expectations eased to 3.5% from 4.0% in April, below expectations of 3.9%. The May 3-year CPI expectations were unchanged from April at 2.9%, higher than expectations of 2.8%.
The markets are discounting a +5% chance for a +25 bp rate hike by the ECB at its next policy meeting on July 23.
USD/JPY (^USDJPY) today is down by -0.12%. The yen is moving higher today after today’s June Tokyo CPI report showed prices rose more than expected, a hawkish factor for BOJ policy. Also, today’s -3% fall in crude oil prices is supportive for the Japanese economy and the yen as Japan imports more than 90% of its energy. In addition, today’s -4% decline in the Nikkei Stock Index boosted safe-haven demand for the yen.
