Dollar Climbs on Signs the US Economy Is Holding Up

Yahoo

17-07-2025

The dollar index (DXY00) today is up +0.35% at a 3.5-week high. Signs of strength in the US economy may keep the Fed from cutting interest rates and are supportive of the dollar. Weekly initial unemployment claims unexpectedly fell to a 3-month low, June retail sales rose more than expected, and the July Philadelphia Fed business outlook survey rose to a 5-month high. The dollar added to its gains today after Fed Governor Kugler said it's appropriate for the Fed to hold rates steady for "some time."
US weekly initial unemployment claims unexpectedly fell -7,000 to a 3-month low of 221,000, showing a stronger labor market than expectations of an increase to 233,000.
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US June retail sales rose +0.6% m/m, stronger than expectations of +0.1% m/m, and Jun retail sales ex-autos rose +0.5% m/m, stronger than expectations of +0.3% m/m.
The US June import price index ex-petroleum was unchanged m/m, weaker than expectations of +0.2% m/m.
The US July Philadelphia Fed business outlook survey rose +19.9 to a 5-month high of 15.9, stronger than expectations of -1.0.
The US July NAHB housing market index rose +1 to 33, right on expectations.
Fed Governor Kugler said the Fed should keep interest rates on hold "for some time," citing the acceleration of inflation as tariffs begin to boost prices.
On the trade front, President Trump said late Wednesday that he intends to send a tariff letter to more than 150 countries notifying them their tariff rates could be 10% or 15%, effective August 1, and that the group was "not big countries who don't do that much business with the US." Also, Commerce Secretary Lutnick said Nvidia could soon resume sales of its less advanced H20 chips to China, and Advanced Micro Devices received similar assurances from the Commerce Department, in a sign that the US may be in the process of negotiating a grand trade deal with China. Treasury Secretary Bessent is expected to meet his Chinese counterpart, Vice Premier He Lifeng, within "the next couple of weeks" and signaled the US will likely extend an August 12 deadline for the easing of sky-high tariffs.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 3% at the July 29-30 FOMC meeting and 58% at the following meeting on September 16-17.
EUR/USD (^EURUSD) today is down -0.44% at a 3.5-week low. The dollar's strength today is undercutting the euro. The euro also came under pressure on comments from Italian Deputy Premier Tajani, who said the euro is "too strong and the ECB needs to cut interest rates "to weaken the euro.
Swaps are pricing in a 1% chance of a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) today is up by +0.41%. The yen is under pressure due to concern that Japanese Prime Minister Ishiba's Liberal Democratic Party (LDP) could lose its majority in Sunday's upper house election. The promises by Japan's ruling Liberal Democratic Party of cash handouts to voters and promises of lower taxes by the opposition have sparked concerns of fiscal deterioration, which are bearish for the yen. The yen recovered from its worst levels after T-note yields gave up an early advance and turned lower, improving the yen's interest rate differentials.
Japanese trade news is mixed for the yen. On the negative side, Japan's June exports unexpectedly fell -0.5% y/y, weaker than expectations of +0.5% y/y. Conversely, June imports unexpectedly rose +0.2% y/y, stronger than expectations of -1.1% y/y.
August gold (GCQ25) today is down -28.60 (-0.85%), and September silver (SIU25) is down -0.144 (-0.38%). Precious metals today are moving lower, with the price of gold sliding to a 1.5-week low. Today's rally in the dollar index to a 3.5-week high is bearish for metals. Also, strength in stocks today has curbed safe-haven demand for precious metals. In addition, precious metals came under pressure after President Trump said he's "not planning on doing anything" to remove Fed Chair Powell. Finally, hawkish comments today from Fed Governor Kugler undercut precious metals when she said the Fed should keep interest rates on hold "for some time."
Precious metals have safe-haven support from global trade tensions after President Trump said that he intends to send a tariff letter to more than 150 countries notifying them their tariff rates could be 10% or 15%, effective August 1. Also, fund buying of gold continues to support prices after the amount of gold in ETFs rose to a nearly 2-year high on Wednesday.
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 Barchart.com