The dollar index (DXY00) today is down by -0.43%.  The dollar today gave up an overnight advance and turned lower after the US May ADP employment change rose less than expected and posted its smallest increase in more than two years, a sign of labor market weakness and a dovish factor for Fed policy.  Also, falling T-note yields today have weakened the dollar’s interest rate differentials.  Losses in the dollar accelerated today after the US May ISM services index unexpectedly contracted for the first time in 11 months.

The US May ADP employment change rose by +37,000, weaker than expectations of +114,000 and the smallest increase in more than two years.

The US May ISM services index unexpectedly fell -1.7 to 49.9, weaker than expectations of an increase to 52.0 and the first time the index has fallen below 50 and contracted in 11 months.

The markets are discounting the chances at 4% for a -25 bp rate cut after the June 17-18 FOMC meeting.

EUR/USD (^EURUSD) today is up by +0.41%.  The euro is climbing today after weaker-than-expected US ADP and ISM reports weighed on the dollar.  The euro also garnered support today after the Eurozone May S&P composite PMI was revised higher.  Gains in the euro are limited by expectations for the ECB to cut interest rates by -25 bp at Thursday’s policy meeting. 

The Eurozone May S&P composite PMI was revised upward by +0.7 to 50.2 from the previously reported 49.5.

Swaps are discounting the chances at 98% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.

USD/JPY (^USDJPY) today is down by -0.52%.  The yen is finding support today from a weaker dollar.  The yen also has support after the Japan May Jibun Bank services PMI was revised upward.  The yen added to its gains today after the 10-year T-note yield fell to a 3-1/2 week low.  Gains in the yen are limited after Reuters reported that the BOJ is considering slowing the pace of tapering in its bond purchases as of the next fiscal year, a negative factor for the yen.

The Japan May Jibun Bank services PMI was revised upward by +0.2 to 51.0 from the previously reported 50.8.

August gold (GCQ25) today is up +14.60 (+0.43%), and July silver (SIN25) is up +0.012 (+0.03%).  Precious metals today are moving higher on a weaker dollar.  Also, lower global bond yields today are supportive of precious metals. In addition, today’s weaker-than-expected US ADP and ISM reports were dovish factors for Fed policy and supportive of precious metals prices.  Finally, precious metals prices have continued safe-haven support from global trade tensions and geopolitical tensions in Ukraine and the Middle East.

Gains in silver prices are limited today on concern the ongoing US-China trade turmoil will weaken economic activity and industrial metals demand after President Trump said Chinese President Xi Jinping is “very tough and extremely hard to make a deal with,” dampening optimism that a trade deal can be made between the two countries in the near future.  Also, today’s weaker-than-expected US ADP and ISM reports were a signal weakness in the US economy and were negative for industrial metals demand.