The dollar index (DXY00) on Tuesday fell by -0.265 (-0.26%). A decline in T-note yields Tuesday weighed on the dollar. Also, long liquidation pressures undercut the dollar ahead of the results of the Tue/Wed FOMC meeting. The dollar recovered some of its losses on stronger-than-expected U.S. economic data on Mar factory orders and May JOLTS job openings.
U.S. economic data Monday was bullish for the dollar. Mar factory orders rose +2.2% m/m, stronger than expectations of +1.2% m/m and the largest increase in 10 months. Also, Mar JOLTS job openings unexpectedly rose +205,000 to a record 11.549 million, showing a stronger labor market than expectations of a decline to 11.200 million.
EUR/USD (^EURUSD) on Tuesday rose by +0.0019 (+0.18%). Signs of strength in the Eurozone labor market were supportive for EUR/USD after the Eurozone Mar unemployment rate fell -0.1 to a record low 6.8%. Also, soaring producer price pressures in the Eurozone pushed the 10-year German bund yield up to a 6-3/4 year high of 1.015% Tuesday, which strengthened the euro’s interest rate differentials. In addition, hawkish comments Tuesday from ECB Executive Board member Schnabel were bullish for the euro.
The Eurozone Mar unemployment rate fell -0.1 to a record low 6.8% (data from 1998), right on expectations.
Eurozone Mar PPI rose a record +36.8% y/y (data from 1982), stronger than expectations of +36.3% y/y.
Hawkish comments Tuesday from ECB Executive Board member Schnabel were supportive of EUR/USD when she said it’s time for policymakers to act to tame inflation and “from today’s perspective, I think a rate hike in July is possible.”
USD/JPY (^USDJPY) on Tuesday fell by -0.03 (-0.02%). USD/JPY on Tuesday fell back slightly Tuesday as a decline in T-note yields strengthened the yen. Trading activity in USD/JPY was muted Tuesday, with Japanese markets closed for the Constitutional Memorial Day holiday.
June gold (GCM22) on Tuesday closed up +7.00 (+0.38%), and July silver (SIN22) closed up +0.081 (+0.36%). Gold and silver Tuesday posted modest gains. A weaker dollar Tuesday sparked short-covering in precious metals after Monday’s sharp losses. Gold prices also rise Tuesday on lower global bond yields. In addition, soaring producer prices in the Eurozone boosted demand for gold as an inflation hedge after Eurozone Mar PPI rose more than expected at the fastest pace on record.
The dollar and gold have continued safe-haven support from the negative impact of the worldwide spread of the omicron Covid variant on the global economic recovery. China reported last Monday that new Covid infections have spread to 26 of 31 mainland provinces, up from 12 at the start of March. Also, the 7-day average of new U.S. Covid infections rose to a 2-month high of 57,318 last Thursday.