The dollar index (DXY00) fell by -0.17% on Wednesday as a surging S&P 500 to a new record high reduced demand for dollar liquidity across global markets.
Weaker-than-expected U.S. economic reports added further downward pressure on the greenback, with both July ADP employment and July ISM services data missing analyst forecasts.
The U.S. July ADP employment change rose by just +44,000, falling well short of market expectations of +65,000, signaling a softer labor market than anticipated.
The July ISM services index edged up +0.1 to 54.1, also missing expectations of 54.5, though the July ISM services prices paid sub-index unexpectedly surged +2.6 to 70.3 against forecasts of a decline to 65.0.
Dollar losses were partially limited by hawkish remarks from two Federal Reserve officials who signaled that tighter monetary policy remains necessary to bring inflation under control.
Kansas City Fed President Jeff Schmid stated, “Given the strength of demand and investment, I do not see the current stance of monetary policy as restrictive,” adding, “As such, I believe that bringing inflation down to the Fed’s 2% objective will require tighter policy.”
Minneapolis Fed President Neel Kashkari said the Fed should start raising interest rates incrementally right now to curb inflation that remains too high.
Markets are currently discounting a 54% probability of a +25 basis point rate hike at the next FOMC meeting scheduled for September 15-16.
EUR/USD (^EURUSD) rose by +0.16% on Wednesday, benefiting from broad dollar weakness and an upward revision to the Eurozone July S&P composite PMI, which moved to 52.0 from a previously reported 51.9.
Eurozone June PPI eased to 4.6% year-over-year from 5.9% in May, meeting expectations and providing a dovish signal for ECB policy, with markets pricing an 81% chance of a +25 bp ECB rate hike at its September 10 meeting.
USD/JPY (^USDJPY) slipped by -0.02% as the yen drew modest support from hawkish Bank of Japan meeting minutes, which showed most board members saw upside risks to underlying inflation.
The yen also carried over support from Tuesday when U.S. Treasury Secretary Scott Bessent signaled continued joint intervention in forex markets, saying, “We will do whatever it takes” to support Japan.
October COMEX gold (GCV26) soared +151.40 or +3.67% to a 7-week high, while September COMEX silver (SIU26) climbed +2.043 or +3.39% to a 1-month high on Wednesday.
Precious metals rallied sharply for a second consecutive session, boosted by the weaker dollar and reports from Axios that the U.S., Iran, and Oman were nearing an interim agreement to reopen the Strait of Hormuz.
Copper prices surged to a 2-month high as LME copper inventories dropped to a 5-month low, with more than 200,000 metric tons of copper arriving at U.S. ports in July, the largest monthly volume in data going back to 2014.
U.S. importers have been stockpiling copper ahead of President Trump’s anticipated decision on tariffs for refined copper imports, tightening global supplies and lifting silver prices through commodity market linkages.
Despite the recent rally, long holdings in gold ETFs fell to a 10-month low last Monday after reaching a 3.5-year high on February 27, representing a bearish overhang for near-term prices.
Strong central bank demand continues to underpin gold, with China’s PBOC boosting bullion reserves by +480,000 ounces to 75.44 million troy ounces in June, marking the twentieth consecutive monthly increase.
