The dollar index (DXY00) on Wednesday fell by -0.39%. The dollar on Wednesday dropped to a 1-1/2 week low on concerns that the ongoing U.S. banking turmoil will prompt the Fed to stop raising interest rates. Also, Wednesday’s U.S. Mar capital goods new orders report was weaker-than-expected and weighed on the dollar.
U.S. Mar capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, fell -0.4% m/m, weaker than expectations of -0.1% m/m.
EUR/USD (^EURUSD) on Wednesday rose by +0.58% and posted a 1-year high. A slump in the dollar Wednesday supported moderate gains in the euro. EUR/USD also garnered support from positive comments from ECB Vice President Guindos, who said the Eurozone looks to avoid a recession. In addition, an increase in German May GfK consumer confidence to a 13-month high was bullish for the euro.
The German Economy Ministry raised its 2023 German GDP forecast to +0.4% from a January forecast of +0.1%.
ECB Vice President Guindos said, "Growth in Q1, according to leading indicators, is going to be possible," and the Eurozone looks to avoid a recession that had been expected as recently as late last year.
ECB Governing Council member Vujcic said the ECB "has no choice but to continue raising interest rates as inflation is falling, but core inflation is stubbornly high."
The German May GfK consumer confidence index rose +3.6 to a 13-month high of -25.7, stronger than expectations of -28.0.
USD/JPY (^USDJPY) on Wednesday fell by -0.18%. The yen Wednesday extended Tuesday’s gains to a 1-1/2 week high against the dollar. The U.S. banking turmoil has boosted the safe-haven demand for the yen after First Republic Bank plunged to a record low after it was said to face potential curbs on borrowing from the Federal Reserve.
June gold (GCM3) on Wednesday closed down -8.50 (-0.42%), and May silver (SIK23) closed down -0.006 (-0.02%). Precious metals Wednesday gave up early gains and closed moderately lower. A rebound in T-note yields Wednesday sparked long liquidation in precious metals after the 10-year T-note yield rose +2.8 bp to 3.428% after initially falling to a 1-1/2 week low of 3.373%. Metals price Wednesday initially moved higher after the dollar index dropped to a 1-1/2 week low. Also, the U.S. banking turmoil has boosted safe-haven demand for precious metals.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
