The dollar index (DXY00) rose by +0.05% today, driven by stronger U.S. consumer spending, as July personal spending increased by +0.5% month-over-month, the highest growth in four months. Additionally, the U.S. July core PCE price index, the Federal Reserve’s preferred inflation measure, climbed to a five-month high of +2.9% year-over-year, further supporting a hawkish Fed policy stance. However, the dollar faced some headwinds due to weaker-than-expected data, including a drop in the August MNI Chicago PMI to 41.5, below expectations of 46.0, and a lower revision of the University of Michigan’s August consumer sentiment index to 58.2 from 58.6.
Fed Governor Christopher Waller expressed support for a 25 basis point rate cut at the upcoming September FOMC meeting, with market-based estimations showing an 89% chance of this cut. Concerns about the Fed’s independence arose following President Trump’s statement about potentially firing Fed Governor Lisa Cook, which could undermine foreign investor confidence in the dollar. Meanwhile, in the Eurozone, the euro strengthened as Germany reported an unexpected decline in unemployment by 9,000 and higher-than-expected August CPI, despite falling retail sales.
In Japan, the yen gained slightly after the July consumer confidence index reached a seven-month high of 34.9, though it was impacted by weaker-than-expected industrial production and retail sales. The jobless rate fell to a five-and-a-half-year low of 2.3%. Despite a stronger dollar and rising global bond yields putting pressure on precious metals, gold and silver saw price increases, with gold rising to a three-week high amidst ongoing global inflation concerns and geopolitical risks.
