The dollar index (DXY00) climbed to a 13-month high on Tuesday, gaining +0.36%, as equity markets plunged, driving investors toward safe-haven currency. The rally was bolstered by the Federal Reserve’s July 28–29 policy meeting expectations, with swaps markets pricing a 36% chance of a 25-basis-point rate cut. The dollar’s momentum followed the Fed’s June meeting projections for higher interest rates, though mixed economic signals tempered gains. The US June S&P manufacturing PMI unexpectedly rose to 55.7, up 0.6 points from May and marking the strongest expansion in four years, while the Richmond Fed’s current conditions index fell to 4, below the 8 forecast.
EUR/USD (^EURUSD) dropped to a one-year low, falling -0.42%, amid weakness in the euro. The currency weakened further after ECB President Lagarde’s dovish comments reduced expectations of further rate hikes. Despite the ECB’s mixed PMI data—manufacturing PMI dipped to 51.3 versus 51.6 expected, while the composite PMI rose to 49.5 above 49.2—the euro faced pressure from hawkish remarks by ECB Chief Economist Philip Lane, who warned inflation could remain above the central bank’s target. Markets discounted a 10% chance of a 25-basis-point ECB rate hike at its July 23 meeting.
USD/JPY (^USDJPY) fell -0.01%, as the yen gained slight strength from improved June S&P manufacturing (54.9) and services (51.8) PMI data. However, concerns over the Bank of Japan’s (BOJ) slow rate-hike trajectory limited yen gains. BOJ Deputy Governor Uchida signaled cautious policy normalization, and Finance Minister Satsuki Katayama’s remarks about coordinated FX intervention with the US Treasury hinted at potential market actions if the yen breaches 160 per dollar.
Precious metals retreated sharply, with August gold (GCQ26) down -53.30 (-1.27%) and July silver (SIN26) plunging -3.513 (-5.36%). The dollar’s strength and equity market volatility spurred profit-taking in metals, though some support came from weaker crude oil prices and safe-haven demand amid UK political uncertainty following Keir Starmer’s resignation announcement. Central bank demand for gold persisted, as China’s People’s Bank of China (PBOC) added 320,000 ounces to its reserves in May, marking the largest monthly increase in 17 months.
Crude oil prices fell to a 3.5-month low, easing inflation fears and potentially encouraging monetary easing—a bullish factor for metals. However, sustained profit-taking in ETFs pressured gold and silver prices.
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