Dollar Falls on Fed-Friendly US Economic Reports and Euro Strength

Group 1: Euro and ECB - The euro rose by +0.37% after the ECB kept interest rates unchanged and raised its 2025 Eurozone GDP forecast to +1.2% from +0.9% [1][5] - ECB President Lagarde indicated that the disinflationary process is over, suggesting that the ECB is done cutting interest rates [1][5] - The ECB maintained its 2025 Eurozone inflation ex-food and energy estimate at 2.4% [5] Group 2: US Economic Indicators - US August CPI increased to +2.9% y/y from +2.7% y/y in July, aligning with expectations [3] - Weekly initial unemployment claims rose by +27,000 to a 3.75-year high of 263,000, indicating a weaker labor market than anticipated [3][4] - The markets are pricing in a -73 bp rate cut in the federal funds rate by year-end, reducing it to 3.60% from the current 4.33% [2] Group 3: Dollar and Fed Expectations - The dollar index fell by -0.28% as jobless claims rose unexpectedly and CPI met expectations, reinforcing the likelihood of a 25 bp rate cut by the Fed [4] - The dollar is under pressure from increased expectations for Fed easing and concerns over Fed independence [3][4] Group 4: Precious Metals Market - Gold prices closed down -0.23% while silver prices rose +1.32%, reflecting mixed performance in precious metals [9] - Gold demand is supported by geopolitical risks in Europe and increased purchases by China's central bank, which raised its gold reserves to 74.02 million troy ounces [10] - Fund buying of precious metal ETFs has led to gold holdings reaching a 2.25-year high and silver holdings a 3-year high [12]