Fed Talks Dollar Down and That Sends Gold Up

The schizophrenic views of the Fed and its inability to stay steady on advisement can summed up as follows. Today this was also compounded by flat-lining consumer prices in July.

The U.S. dollar hit its lowest levels in more than seven weeks against the euro, yen and Swiss franc on Tuesday a day after dovish comments from a San Francisco Fed President John William.

The weak dollar helped to push gold up by $8.50 or +0.76% at 4PM in New York. The commentaries also hurt U.S. stocks. 

The dollar has pared some those losses after New York Fed President William Dudley told financial reporters that the Federal Reserve could possibly raise rates as soon as September. There so many qualifiers in Dudley’s statements, we felt we ought to get something to settle the stomach.

"We're edging closer towards the point in time where it'll be appropriate to raise interest rates further. I think it's possible [at the September FOMC meeting].

"We have to see how the data falls and where we are in terms of the broad supports for the economy. I think the economy is in OK shape. We're getting closer in the sense that headline inflation is drifting up a little bit because the earlier declines from energy prices are dropping out of year over year calculations."

We want to grab his lapels and shout: “What the heck are you talking about?” Crude is still 10% below its 2016 highs and it is half what it was in the summer of 2014.

But the babbling by the Fedsters wasn’t the only thing keeping the dollar on the downslide. In Tokyo, the surging yen told markets that investors were uncertain as to whether the Bank of Japan’s recent stimulus moves could re-inflate the economy there.

The yen, in other words, began rising in Asia early today. The Nikkei fell 1.60% on the hardening yen.

That inspired European traders to take the major indexes there lower. The French CAC was stung the worst, off 0.80%.

As we mentioned, consumer spending was flat in July, but housing starts bounced up 2.1% from a year earlier and are at the highest since this past February. Industrial production rose by 0.7% in July, the most since November 2014, according to the Federal Reserve. Predictions were for a 0.30% rise.

Maybe the Fed commentators are all looking at the same elephant like the blind men did with each seeing something quite different from one another. Some data looks soft, some mediocre and some very strong.

Wishing you as always, good trading,