The dollar index (DXY) is down 0.16% as of today, consolidating below last Friday’s two-week high, driven by a rally in the Chinese yuan, which reached a 3.5-year high. However, a rise in WTI crude oil prices by over 2% to a one-week high is raising inflation expectations and potentially increasing the Federal Reserve’s interest rate hike probability to 63% for its September 15-16 meeting, up from 36% prior to comments by Fed Chair Warsh.
In China, the August manufacturing Purchasing Managers’ Index (PMI) improved to 49.8 from 49.2, surpassing expectations of 49.5, while the non-manufacturing PMI held steady at 49.0, below a forecast of 49.4. In Germany, consumer prices rose 0.2% month-on-month and 2.9% year-on-year in August, lower than predicted gains, contributing to a 96% likelihood of a 25 basis point European Central Bank rate hike on September 10. Japan’s July industrial production unexpectedly rose by 0.1%, against expectations of a 0.7% decline, and retail sales surged by 2.4% month-on-month, beating the forecast of 1.6%.
Gold and silver prices have declined, with October COMEX gold down $48.80 (-1.09%) and September silver down $0.655 (-0.98%), influenced by higher global bond yields and inflation expectations from rising crude oil prices. Notably, the People’s Bank of China increased its gold reserves to 76.08 million troy ounces in July, marking the twenty-first consecutive month of increases.
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