The dollar index (DXY00) is down by -0.11% today. The dollar is moving lower today as strength in stocks has reduced liquidity demand for the currency. The dollar dropped to its low after US Jun existing home sales unexpectedly declined.
Losses in the dollar are limited after US weekly jobless claims unexpectedly fell to a 6-week low, a sign of labor market strength. Also, the escalation of hostilities between the US and Iran has boosted demand for the dollar as a safe haven.
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The US military struck Iran for a second day today, hitting about 90 Iranian targets to degrade the country’s ability to attack commercial shipping in the Strait of Hormuz. Iran responded by targeting US bases in Bahrain, Kuwait, and Qatar with drones and missiles.
US weekly initial unemployment claims unexpectedly fell -2,000 to a 6-week low of 215,000, showing a stronger labor market than expectations of a +2,000 increase to 217,000.
US Jun existing home sales unexpectedly fell -2.4% m/m to 4.09 million, weaker than expectations of an increase to 4.20 million.
The swaps markets are discounting the odds at 24% for a +25 bp rate hike at the next FOMC meeting on July 28-29.
EUR/USD (^EURUSD) is up by +0.19% today. The euro is edging higher today amid dollar weakness. The euro also found support from higher European government bond yields, which strengthened the euro’s interest rate differentials after the 10-year German Bund yield climbed to a 1.5-month high of 3.118% today.
Today’s German trade news was mixed for the euro. German May exports unexpectedly rose +0.9% m/m versus expectations of a -0.4% m/m decline. However, May imports fell -2.5% m/m, weaker than expectations of a -0.8% m/m decline.
The markets are discounting a +13% chance for a +25 bp rate hike by the ECB at its next policy meeting on July 23.
USD/JPY (^USDJPY) is down by -0.13% today. The yen is moving higher today on signs of strength in Japan’s economy after June machine tool orders posted their largest increase in nearly 4.5 years. The yen also found support from the quarterly Sakur report, which flagged inflation risks in Japan’s economy, a hawkish factor for BOJ policy. In addition, stronger Japanese government bond yields have strengthened the yen’s interest rate differentials after the 10-year JGB yield climbed to a 29-year high of 2.902% today.
