US dollar steadies as gold nears three month high

Summary

The US dollar was steady on Wednesday after pressure from the Treasury’s bond buyback programme, while spot gold climbed close to a three-month high. Brent crude fell more than $2 to $86.22 a barrel as renewed Iran-Oman talks raised hopes of improved flows through the Strait of Hormuz. Global equities were subdued, with investors cautious ahead of Nvidia’s latest results. Commodity vessel transits through Hormuz nevertheless fell to a three-month low.

Equities

The FTSE 100 closed 0.3% higher at 10,886.16 on Tuesday, while the FTSE 250 gained 0.6% to 24,856.05. UK housing stocks led the advance after the government set out plans to spend £10 billion on lower-cost housing, with the homebuilders index rising 2.5%.

Vistry jumped 16.3% on Tuesday after receiving initial funding of £350 million to deliver more than 3,000 affordable homes under the government programme. Melrose Industries climbed 10.4% after the GKN Aerospace owner said it was targeting 28 September to resume full production at its Garden Grove facility.

Glencore and Anglo American both rose around 2% on Tuesday as copper prices reached their highest level in a week. Next gained 2.4% after Citigroup upgraded the clothing retailer to buy from neutral, while BP and Shell fell as oil prices dropped more than 3%.

US stocks also closed higher on Tuesday, with the Dow Jones Industrial Average up 0.3% at 53,577.40, the S&P 500 rising 0.32% to 7,677.24 and the Nasdaq Composite gaining 0.66% to 26,151.30. Technology shares recovered ahead of Nvidia’s quarterly results on Wednesday.

Nvidia rose 2.2% on Tuesday, while Meta gained almost 2%. Micron climbed 2.5% and the wider semiconductor index rose 1.4%, recovering part of Monday’s 2.7% decline. Advanced Micro Devices jumped 4.9% after Raymond James upgraded the chipmaker.

Moderna surged 14% on Tuesday after Barclays raised its price target, following late-stage trial results for a skin cancer vaccine developed with Merck. The largest fall came from Dick’s Sporting Goods, which plunged 30.7% after cutting its annual forecasts as athletic wear demand weakened. Target dropped 3.8% after withdrawing a Halloween costume criticised for evoking blackface, while concerns resurfaced over the retailer’s turnaround efforts.

Forex & Commodities

The US dollar was steady early this morning, with the dollar index at 98.92 after ending a three-day run of gains on Tuesday. The euro was unchanged at $1.168, while the British pound held at $1.365 and the dollar traded at 159.1 yen.

The Australian dollar rose to $0.7172 early this morning after Australia’s trimmed mean inflation rate increased to an annualised 3.6%. The New Zealand dollar fell to $0.5962 ahead of next Wednesday’s Reserve Bank of New Zealand meeting, when markets overwhelmingly expect a 25 basis point interest rate increase to 2.75%.

Attention in the US turns to July’s Personal Consumption Expenditures inflation figures, due later on Wednesday, followed by Federal Reserve Chair Kevin Warsh’s Jackson Hole speech on Friday. Markets currently price a 61.6% probability that the Fed will leave interest rates unchanged in September after weaker employment figures earlier this month reduced expectations of an increase.

Spot gold fell early this morning to $4,643 an ounce after reaching its highest level since mid-May on Tuesday. The precious metal had risen sharply following last week’s US Treasury bond buyback announcement, with Wednesday’s inflation figures now the immediate focus.

Oil prices dropped sharply early this morning as renewed Iran-Oman talks raised hopes of reopening the Strait of Hormuz. Brent crude fell to $86.28 a barrel and US West Texas Intermediate declined to $80.29, after both benchmarks had already fallen more than 3% on Tuesday. Iran and Oman have discussed creating a temporary navigational corridor through the strait and clearing mines, although ship traffic remains well below pre-war levels.