The dollar index (DXY00) on Tuesday fell to a 3-week low and finished down by -0.30%. Tuesday’s U.S. May CPI report was negative for the dollar as it showed an easing of price pressures that boosted expectations for the Fed to pause its rate hike campaign at the Tue/Wed FOMC meeting. Also, the strength in stocks Tuesday curbed liquidity demand for the dollar.
U.S. May CPI eased to +4.0% y/y from +4.9% y/y in Apr, better than expectations of +4.1% y/y and the smallest increase in more than two years. Also, May CPI ex-food and energy eased to +5.3% y/y from +5.5% y/y in Apr, the smallest increase in 1-1/2 years but slightly higher than expectations of +5.2% y/y.
EUR/USD (^EURUSD) on Tuesday rose by +0.26% and posted a 3-week high. A weaker dollar Tuesday was supportive of the euro. Also, an unexpected increase in the German May ZEW business confidence index was bullish for the euro. In addition, central bank divergence is positive for EUR/USD on the prospects for the Fed to pause raising interest rates this week while the ECB continues to raise interest rates.
The German May ZEW expectations of economic growth index unexpectedly rose +2.2 to -8.5, stronger than expectations of a decline to -13.5.
USD/JPY (^USDJPY) on Tuesday rose by +0.47%. The yen fell moderately Tuesday as an increase in T-note yields weakened the yen. Also, a rally in the Nikkei Stock Index Tuesday to a 33-year high curbed safe-haven demand for the yen. Tuesday’s Japanese economic news was positive for the yen after Q2 BSI large manufacturing business conditions increased.
The Japan Q2 BSI large manufacturing business conditions index rose to -0.4 from -10.5 in Q1.
August gold (GCQ3) on Tuesday closed down -11.10 (-0.56%), and July silver (SIN23) closed down -0.237 (-0.99%). Precious metals Tuesday gave up an early advance and closed moderately lower, with gold falling to a 2-week low. Higher T-note yields Tuesday weighed on metals prices. Also, Tuesday’s rally in stocks curbed the safe-haven demand for precious metals.
Precious metals Tuesday initially moved higher after the dollar index fell to a 3-week low. Precious metals also have support as the easing of price pressures in Tuesday’s U.S. May CPI report bolsters the chance that the Fed will pause its rake hike campaign. In addition, gold prices found support on Tuesday’s action by the Chinese central bank to cut the seven-day reverse repurchase rate by -10 basis points to 1.9%, the first reduction in the rate since August 2022.
More Precious Metal News from Barchart
- Stocks Climb on the Outlook for the Fed to Pause Rate Hikes
- Dollar Recovers Early Losses as T-note Yields Firm
- Stocks Higher Ahead of U.S. May CPI Report and FOMC Meeting
- Dollar Follows T-note Yields Higher
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.
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