The dollar index (DXY00) on Tuesday rose by +0.13%. Higher T-note yields Tuesday strengthened the dollar’s interest rate differentials. Also, hawkish comments from former Fed Vice Chair Clarida were bullish for the dollar. Meanwhile, weaker-than-expected Eurozone economic news Tuesday weighed on the euro.
Former Fed Vice Chair Clarida said the Fed would likely raise interest rates again in this cycle and is "unlikely" to start cutting rates until 2024.
EUR/USD (^EURUSD) on Tuesday fell by -0.18%. The euro was under pressure after Tuesday’s Eurozone retail sales and German factory orders reports were weaker than expected. Also, a decline in the ECB's monthly consumer inflation expectations survey was dovish for ECB policy and bearish for the euro.
Eurozone Apr retail sales were unchanged m/m, weaker than expectations of +0.2% m/m.
German Apr factory orders unexpectedly fell -0.4% m/m, weaker than expectations of +2.8% m/m.
The ECB's monthly consumer inflation expectations for the next 12 months fell to 4.1% in April from 5.0% in March, and for the next three years ahead fell to 2.5% in April from 2.9% in March.
USD/JPY (^USDJPY) on Tuesday rose by +0.04%. The yen fell back Tuesday today from weaker-than-expected Japanese economic news. Also, higher T-note yields Tuesday undercut the yen. In addition, Tuesday’s rally in the Nikkei Stock Index to a 32-year high curbed safe-haven demand for the yen.
Tuesday’s weaker-than-expected Japanese economic news was bearish for the yen. Apr household spending fell -4.4% y/y, weaker than expectations of -2.4% y/y and the biggest decline in over two years. Also, Apr labor cash earnings rose +1.0% y/y, weaker than expectations of +1.8% y/y.
August gold (GCQ3) on Tuesday closed up +7.20 (+0.36%), and July silver (SIN23) closed up +0.035 (+0.15%). Precious metals Tuesday recovered from early losses and closed slightly higher. Expectations for the Fed to pause its rake hiking cycle at next week’s FOMC meeting are supporting precious metals. Market expectations show only a 23% chance the Fed will raise the fed funds target range by +25 bp at the June 13-14 FOMC meeting.
Metals prices Tuesday initially opened lower after the Reserve Bank of Australia unexpectedly raised its cash rate by +25 bp to 4.10% from 3.85%. Also, a stronger dollar and higher T-note yields on Tuesday weighed on metals. Silver prices found support Tuesday after the World Bank raised its 2023 global GDP forecast to 2.1% from 1.7%, which is supportive of industrial metals demand.
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.
