
ECB Braces for ‘More Volatile' Inflation After Reaching 2%
In 11 years of European Central Bank retreats to the Portuguese resort of Sintra, euro-region crises have too often been an embarrassing distraction.
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US weekly initial unemployment claims unexpectedly fell -4,000 to a 3-month low of 217,000, showing a stronger labor market than expectations of an increase to 226,000. The US June Chicago Fed national activity index rose +0.06 to -0.10, stronger than expectations of -0.15. The July S&P US manufacturing PMI fell -3.4 to 49.5, weaker than expectations of 52.7 and the lowest level in 7 months. US June new home sales rose +0.6% m/m to 627,000, weaker than expectations of +4.3% m/m to 650,000. Federal funds futures prices are discounting the chances for a -25 bp rate cut at 3% at the July 29-30 FOMC meeting and 63% at the following meeting on September 16-17. EUR/USD (^EURUSD) Thursday fell by -0.03%. The euro fell from a 2.5-week high Thursday and turned slightly lower on comments from ECB President Lagarde, who said the economic risks to the Eurozone are tilted to the downside and a stronger euro could dampen inflation more than expected. 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Also, Thursday's US weekly initial unemployment claims report showed jobless claims unexpectedly fell to a 3-month low, a sign of US labor market strength that is hawkish for Fed policy and bearish for precious metals. In addition, higher global bond yields and a stronger dollar on Thursday undercut the prices of precious metals. Finally, Thursday's action by the ECB to keep interest rates unchanged, along with its post-meeting statement that the Eurozone economy is proving resilient, was bearish for precious metals. Precious metals continue to receive safe-haven support from geopolitical risks, including the conflicts in Ukraine and the Middle East. Fund buying of precious metals continues to support prices after gold holdings in ETFs rose to a two-year high on Wednesday, and silver holdings in ETFs reached a three-year high on the same day. On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on


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