Dollar Gains on Strength in US Services Activity

The dollar index (DXY00) is up by +0.22% today. The dollar is moving higher today on the as-expected June ISM services index report. The dollar also found support amid yen weakness after Japanese authorities failed to intervene in the forex market to support the yen while US markets were closed last Friday for a holiday, a previous prime time for Japan's intervention. The US June ISM services index fell -0.5 to 54.0, right on expectations. The June ISM services price-paid sub-index eased to 67.7 from 71.3 in May, stronger than the 67.5 expected. EUR/USD (^EURUSD) is down by -0.17% today. The euro is under pressure today from a stronger dollar. Also, today's weaker-than-expected Eurozone May retail sales report is bearish for the euro. Losses in the euro are limited after the Eurozone July Sentix investor confidence index rose more than expected to a 4-month high. Eurozone May retail sales rose +0.2% m/m, weaker than expectations of +0.3% m/m. The Eurozone July Sentix investor confidence index rose by 10.3 to a 4-month high of -3.1, beating expectations of -10.0. German May factory orders rose +1.9% m/m, stronger than expectations of +1.1% m/m. The markets are discounting a +3% chance for a +25 bp rate hike by the ECB at its next policy meeting on July 23. USD/JPY (^USDJPY) is up by +0.60% today. The yen is falling today after Japanese authorities failed to intervene in the forex market in support of the yen while US markets last Friday were closed for a holiday, a favorite time for intervention by Japan. The yen is retreating despite a jump in Japanese government bond yields, as the 10-year JGB yield soared to a 29-year high of 2.841% today, which strengthens the yen's interest rate differentials. The risk of intervention in currency markets to support the yen is high, as the yen remains firmly above 160 per dollar at a 39-year low. Japanese authorities have intervened in the forex market several times in the past when the yen reached that level. The markets are discounting a +1% chance of a +25 bp BOJ rate hike at the next policy meeting on July 31. August COMEX gold (GCQ26) is up +25.00 (+0.61%), and September COMEX silver (SIU26) is up +1.106 (+1.81%). The dollar's gain on strength in US services activity continues to have significant effects on the global economy. The strong performance of the US services sector has strengthened the dollar and given it an advantage over other currencies. However, with ongoing uncertainties in the global economy, investors need to closely monitor the markets.