The dollar index (DXY00) on Monday was unchanged. The dollar on Monday recovered from overnight losses and was little changed. Short-covering in the dollar emerged Monday morning after St. Louis Fed President Bullard said he favored two more 25 bp rate hikes this year. However, gains in the dollar were limited by the ongoing U.S. debt ceiling impasse and strength in EUR/USD on hawkish comments from ECB President Lagarde.
Fed comments Monday were mixed for the dollar. On the bullish side for the dollar, St. Louis Fed President Bullard said the Fed will have to move interest rates higher to tame inflation, and he's thinking of "two more 25 bp rate hikes this year." On the bearish side, Minneapolis Fed President Kashkari said he might support holding interest rates at current levels at the June FOMC meeting to give Fed officials more time to assess the effects of past rate hikes and the inflation outlook. Also, comments from Atlanta Fed President Bostic signal he favors the Fed pausing its rate-hike regime when he said the Fed had done a lot of tightening and monetary policy acts with a lag, so he is comfortable with waiting a bit to see how things play out.
EUR/USD (^EURUSD) on Monday rose by +0.09%. The euro found support following a market-friendly election outcome Sunday in Greece that reduced political uncertainty. The euro also saw support Monday on hawkish comments from ECB President Lagarde, who said, "We are not done yet" in raising interest rates. Gains in the euro were limited after Monday’s news showed Eurozone Mar construction output fell -2.4% m/m, the biggest decline in more than two years.
Comments Monday from ECB President Lagarde were bullish for EUR/USD when she said, "We are not done yet" in raising interest rates and the "inflation outlook is too high and for too long."
USD/JPY (^USDJPY) on Monday rose by +0.38%. The yen on Monday fell moderately and is just above last Thursday’s 5-1/2 month low against the dollar. Higher T-note yields pressured the yen Monday along with the rally in the Nikkei Stock Index to a 32-year high that curbed the safe-haven demand for the yen. Monday’s weaker-than-expected Japan core machine orders report was dovish for BOJ policy and also weighed on the yen.
Japan Mar core machine orders unexpectedly fell -3.9% m/m, weaker than expectations of a +0.4% m/m increase.
June gold (GCM3) on Monday closed down -4.40 (-0.22%), and July silver (SIN23) closed down -0.199 (-0.83%). Precious metals on Monday posted moderate losses. Higher global bond yields Monday weighed on precious metals. Also, hawkish central bank comments Monday signal higher interest rates that are bearish for metals after St. Louis Fed President Bullard said we would have to move interest rates higher to tame inflation. Also, ECB President Lagarde said, "We are not done yet" in raising interest rates.
Silver prices were also weighed down Monday by industrial metals demand concerns after Eurozone Mar construction output fell by the most in more than two years. However, losses in metals prices were limited as the ongoing U.S. debt-ceiling impasse has sparked 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.
