Dollar slips after dovish Fed comments as gold rises

The dollar resumed its losing ways during a lackluster trading session Tuesday as dovish comments from members of the U.S. central bank weighed on the market. Europe’s common currency strengthened and its stocks retreated, while gold advanced.

The euro joined most G-10 peers in advancing against the greenback, which slipped alongside both Treasuries and U.S. stock futures after two Federal Reserve officials said on Monday that soft inflation was a problem. The Stoxx Europe 600 Index gradually turned lower, though moves across the region were muted. All eyes were on South Africa’s rand as lawmakers prepared to decide the fate of President Jacob Zuma. The currency extended yesterday’s jump.

Markets appeared to spend much of the day in a holding pattern, with investors seeking catalysts amid the summer slowdown. The focal point of this week looks set to be Friday’s U.S. inflation data, which may be key to the interest-rate outlook of the world’s biggest economy. While Fed officials James Bullard and Neel Kashkari voiced concerns over price growth, they played down the risk of market disruption when the central bank starts shrinking its balance sheet.

“Markets are in sleep mode,” Hussein Sayed, a strategist at Forextime Ltd., a retail currency broker, wrote in an emailed note. “Limited news flow is what can be blamed for the narrow trading ranges, but expect this to change as we get closer to Friday’s U.S. CPI release.”

Meanwhile, the latest economic data out of China pointed to steady global demand. The trade surplus in the world’s second-largest economy widened for a fifth month in July as demand for Chinese goods held up in the face of escalating tensions with the U.S.

Terminal users can read more in our Markets Live blog.

Also among the key events looming this week:

• U.K. factory output for June is due Thursday, with industrial production for Italy on Wednesday and for France on Friday.
• This week’s Fed speakers aren’t done: keep a keen ear out for comments by New York Fed boss Bill Dudley on Thursday.
• Dutch Prime Minister Mark Rutte resumes talks to form a coalition government on Wednesday.
• Argentina, Mexico, New Zealand, Peru, the Philippines, Serbia and Zambia set monetary policy.

And here are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index dipped 0.2 percent as of 8:49 a.m. in New York.
• The MSCI All-Country World Index gained less than 0.05 percent to the highest on record.
• The U.K.’s FTSE 100 Index fell 0.1 percent.
• Germany’s DAX Index sank 0.4 percent.
• Futures on the S&P 500 Index dipped 0.1 percent.

Currencies

• The euro rose 0.1 percent to $1.1807.
• The Bloomberg Dollar Spot Index fell 0.1 percent.
• The British pound decreased 0.2 percent to $1.301, the weakest in more than two weeks on a closing basis.
• South Africa’s rand increased 0.3 percent to 13.1868 per dollar, the strongest in more than a week.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.27 percent.
• Germany’s 10-year yield gained one basis point to 0.47 percent.
• Britain’s 10-year yield increased two basis points to 1.157 percent.
• The spread of Italy’s 10-year bonds over Germany’s decreased two basis points to 1.5178 percentage points to the narrowest in about eight months.

Commodities

• Gold gained 0.4 percent to $1,262.55 an ounce, the biggest rise in more than a week.
• West Texas Intermediate crude declined 0.1 percent to $49.32 a barrel.

Asia

• Japan’s Topix index fell 0.2 percent at the close with SoftBank Group Co. declining even after profit topped estimates. Sony Corp. gained after it was added to the JPX-Nikkei Index 400. Australia’s S&P/ASX 200 Index lost 0.5 percent and South Korea’s Kospi index dropped 0.2 percent.
• The Japanese yen jumped 0.3 percent to 110.39 per dollar.

Report courtesy Bloomberg