The dollar index (DXY00) today extended this week's rally and is up by +0.59% at a 2-month high.  Signs of strength in the US economy are boosting the dollar today after the July ADP employment change rose more than expected by the most in four months, and Q2 GDP expanded more than expected.  Also, short covering is supporting the dollar ahead of the results of today's FOMC meeting, where the Fed is expected to keep interest rates unchanged. 

The US July ADP employment change rose +104,000, stronger than expectations of +76,000 and the largest increase in four months.  Also, the Jun ADP employment change was revised upward to -23,000 from the previously reported -33,000.

US Q2 GDP rose +3.0% (q/q annualized), stronger than expectations of +2.6%.  The Q2 core PCE price index rose +2.5% q/q, stronger than expectations of +2.3% q/q.

US Jun pending home sales unexpectedly fell -0.8% m/m, weaker than expectations of a +0.2% m/m increase.

In the latest tariff news, President Trump today said he will impose a tariff rate of 25% on India starting August 1 and suggested he would add an additional penalty over the country's energy purchases from Russia.

Federal funds futures prices are discounting the chances for a -25 bp rate cut at 2% at today's FOMC meeting and 62% at the following meeting on September 16-17.

EUR/USD (^EURUSD) today extended this week's losses and is down by -0.61% at a new 5-week low.  Dollar strength today is undercutting the euro.  Additionally, the negative carryover from Monday is weighing on the euro, following the announcement of the EU-US trade deal, which was seen as favoring the US, with 15% tariffs imposed on most EU goods.  This could pose headwinds to the Eurozone economy due to the higher tariffs.  Better-than-expected Eurozone economic news today on Q2 GDP and July economic confidence is supportive of the euro.

Eurozone Q2 GDP rose +0.1% q/q and +1.4% y/y, stronger than expectations of unchanged m/m and +1.2% y/y.

Eurozone July economic confidence rose +1.6 to a 5-month high of 95.8, stronger than expectations of 94.5.

Swaps are pricing in a 13% chance of a -25 bp rate cut by the ECB at the September 11 policy meeting.

USD/JPY (^USDJPY) today is up by +0.33%.  The yen gave up overnight gains and fell to a 1.5-week low against the dollar after better-than-expected US economic news pushed the dollar higher.  Losses in the yen accelerated today after T-note yields jumped.  The yen initially moved higher in overnight trading after an 8.8 magnitude earthquake off the eastern coast of Russia prompted a tsunami warning for Tokyo Bay, which sparked some safe haven buying of the yen.   

The yen continues to be undercut by concerns that the LDP's loss of its majority in Japan's upper house in the July 20 elections may lead to fiscal deterioration in Japan's government finances, as the government boosts spending and implements tax cuts. 

August gold (GCQ25) today is down -20.00 (-0.60%), and September silver (SIU25) is down -0.481 (-1.26%).  Precious metals are sliding today, with silver falling to a 1.5-week low.  Dollar strength is undercutting metals prices today after the dollar index jumped to a 2-month high.   Also, higher T-note yields are bearish for precious metals.  In addition, today's stronger-than-expected US economic reports on July ADP employment and Q2 GDP are hawkish for Fed policy and may keep the Fed from cutting interest rates. 

Concerns that US tariff policy will undercut global growth are fueling some safe-haven demand for precious metals after President Trump today said he will impose a tariff rate of 25% on India starting August 1 and suggested he would add an additional penalty over the country's energy purchases from Russia.  Precious metals continue to receive safe-haven support from geopolitical risks, including the conflicts in Ukraine and the Middle East.