The greenback index (DXY00) on Friday rose by +0.21%, and edged to a brand new 2.5-week excessive.  The greenback moved greater attributable to a stoop in shares, which boosted some liquidity demand for the greenback.  Additionally, President Trump’s threats to spice up tariffs on Canada and different US buying and selling companions danger stoking inflation pressures that would hold the Fed from chopping rates of interest, a supportive issue for the greenback. 

Late Thursday, President Trump stated a 35% tariff on some Canadian merchandise would take impact on August 1, up from the present 25%.  The brand new Canadian tariffs wouldn’t apply to items traded inside the guidelines of the US-Mexico-Canada Commerce Settlement, and a decrease 10% tariff can be saved on some energy-related imports.  He additionally stated he plans to impose blanket tariffs of 15% or 20% on most US commerce companions. 

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The markets are discounting a 7% probability of a -25 bp price lower on the July 29-30 FOMC assembly.

EUR/USD (^EURUSD) Friday fell by -0.10%, holding simply above Thursday’s 2-week low.  Greenback power weighed on the euro. 

Nonetheless, the euro had underlying help after German bund yields jumped on hawkish feedback from ECB Govt Board member Schnabel, who stated, “The bar for another ECB interest rate cut is very high, and there would only be a case for another rate cut if we saw signs of a material deviation of inflation from our target over the medium term.  And at the moment, I see no signs of that.”

Swaps are pricing in a 2% probability of a -25 bp price lower by the ECB on the July 24 coverage assembly.

USD/JPY (^USDJPY) rose by +0.82%, with the yen falling to a 2.5-week low in opposition to the greenback.  Ramped-up tariff threats by President Trump weighed on the yen attributable to issues that greater US tariffs will undercut the Japanese economic system and forestall the BOJ from additional tightening financial coverage.  Larger T-note yields had been additionally bearish for the yen.  Nonetheless, the yen had some help from rising Japanese authorities bond yields after the 10-year JGB bond yield on Friday climbed to a 5-week excessive of 1.522%.

The yen has been undercut by worries concerning the higher home election in Japan on July 20.  The guarantees by Japan’s ruling Liberal Democratic Celebration of money handouts to voters and guarantees of decrease taxes by the opposition have sparked issues of fiscal deterioration, that are bearish for the yen. 

August gold (GCQ25) on Friday closed up +38.30 (+1.15%), and September silver (SIU25) closed up +1.650 (+4.42%).  Treasured metals surged on Friday, with gold rising to a 1-week excessive and silver hovering to an almost 14-year excessive.  Ramped-up tariff threats by President Trump have boosted safe-haven demand for treasured metals, following his announcement late Thursday that he’ll elevate tariffs on some Canadian merchandise to 35% on August 1, up from the present 25%.  He additionally stated he plans to impose blanket tariffs of 15% or 20% on most US commerce companions.  Friday’s inventory weak spot additionally boosted safe-haven demand for treasured metals.

Bearish components for treasured metals included greenback power and a +7 bp rise within the 10-year T-note yield.  Additionally, ECB Govt Board member Isabel Schnabel stated, “The bar for another ECB interest rate cut is very high.”

Fund shopping for of silver is supporting silver costs as silver holdings in ETFs rose to a 2.75-year excessive on Thursday.  Silver additionally had carryover help from this week’s surge in copper costs to a document excessive, following President Trump’s announcement that the US will impose a 50% tariff on copper imports, efficient August 1. 

On the date of publication,

Wealthy Asplund

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