The dollar index (DXY00) on Monday rose by +0.56%. Higher T-note yields Monday gave the dollar a boost after the 10-year T-note yield rose to a 2-week high. Also, Monday’s U.S. economic news showed signs of strength that was dollar supportive after the Apr Empire manufacturing survey general business conditions index rose to a 9-month high, and the Apr NAHB housing market index rose to a 7-month high. The market shows an 88% chance the Fed will raise the federal funds target range by 25 bp at the upcoming May 2-3 FOMC meeting.
Monday’s U.S. economic news was hawkish for Fed policy and bullish for the dollar. The Apr Empire manufacturing survey general business conditions rose +35.4 to a 9-month high of 10.8, stronger than expectations of -18.0. Also, the Apr NAHB housing market index rose +1 to a 7-month high of 45, right on expectations.
Hawkish comments Monday from Richmond Fed President Barkin were bullish for the dollar when he said, "I want to see more evidence that inflation is settling back to our 2% target." He also said interest rates at their current level were not unusual in a historical sense and that "our economy works just fine with rates at this level."
EUR/USD (^EURUSD) on Monday fell by -0.60%. The euro Monday was under pressure from a stronger dollar. Also, dovish comments Saturday from ECB Governing Council member Centeno weighed on EUR/USD when he said the ECB at its May meeting should either pause its rate hikes or raise by only 25 bp as Eurozone wage data show “no domestic pressure.”
USD/JPY (^USDJPY) on Monday rose by +0.46%. The yen Monday dropped to a 1-month low against the dollar. Higher T-note yields on Monday weighed on the yen. Also, Monday’s rally in the Nikkei Stock Index to a 5-week high reduced the safe-haven demand for the yen.
June gold (GCM3) on Monday closed down -8.80 (-0.44%), and May silver (SIK23) closed down -0.372 (-1.46%). Precious metals on Monday posted moderate losses due to a stronger dollar and higher global bond yields. However, losses in gold were limited as an increase in inflation expectations boosted demand for gold as an inflation hedge after the U.S. 10-year breakeven inflation rate Monday rose to a 2-week high.
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.
