The U.S. dollar index (DXY) ended unchanged on Thursday, as the July Producer Price Index (PPI) report lowered the likelihood of a Federal Reserve rate hike in September to 35%, down from 40%. The report indicated a year-over-year final-demand PPI of +4.7%, slightly below the expected +4.9%, while core PPI rose by +0.2% month-over-month, one-tenth lower than forecasts. In the context of the 10-year T-note yield decreasing by 5 basis points, reduced safe-haven demand emerged amid reports of no new military engagements in the Persian Gulf.
Market expectations indicate a 90% chance of a +25 basis point rate hike from the European Central Bank at its meeting on September 10, compared to only 35% for the Fed’s next meeting on September 15-16. In Japan, the likelihood of a Bank of Japan rate hike rose to 73% from 63% following government support for monetary tightening to bolster the yen. Recent trends show significant fund liquidation in precious metals, with ETF holdings for gold and silver reaching multi-month lows, despite ongoing central bank demand for gold, particularly from China’s PBOC, which increased its reserves to 76.08 million troy ounces.
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