The dollar index (DXY00) on Tuesday rose by +0.05%. The dollar on Tuesday recovered from early losses and posted modest gains. Tuesday’s better-than-expected U.S. housing news was bullish for the dollar. Also, the weakness in stocks Tuesday boosted the liquidity demand for the dollar.
U.S. May housing starts unexpectedly surged +21.7% m/m to a 13-month high of 1.631 million, stronger than expectations of a decline to 1.400 million. May building permits, a proxy for future construction, rose +5.2% to a 7-month high of 1.491 million, stronger than expectations of 1.425 million.
On Monday’s holiday, the U.S. Jun NAHB housing market index rose +5 to an 11-month high of 55, stronger than expectations of 51.
EUR/USD (^EURUSD) on Tuesday fell by -0.04%. The euro Tuesday gave up an early advance and posted modest losses due to a rebound in the dollar. Also, Tuesday’s weaker-than-expected German May PPI report knocked bund yields lower and undercut the euro’s interest rate differentials. EUR/USD on Tuesday initially moved higher on hawkish comments from ECB Governing Council member Rehn who said inflation in the Eurozone is easing “only gradually.”
Eurozone Apr construction output fell -0.4% m/m, the second straight monthly decline.
German May PPI eased to +1.0% y/y from +4.1% y/y in Apr, better than expectations of +1.7% y/y and smallest increase in nearly 2-1/2 years.
ECB Governing Council member Rehn said a pullback in core prices is a prerequisite for pausing rate hikes and "inflation excluding energy and food is falling only gradually and not to the extent desired."
USD/JPY (^USDJPY) on Tuesday fell by -0.42%. On Tuesday, the yen recovered from a 7-1/4 month low against the dollar and moved moderately higher. Comments from Japanese government officials Tuesday sparked short covering in the yen after Finance Minister Suzuki and Economy Minister Nishimura warned that officials were watching out for any excessive or speculative moves in the forex market. Also, Tuesday’s upward revision to Japan’s Apr industrial production was bullish for the yen. The yen on Tuesday initially fell after the 10-year JGB bond yield dropped to a 1-month low, which weakened the yen’s interest rate differentials.
Japan Apr industrial production was revised upward to +0.7% m/m from the initially reported -0.4% m/m.
August gold (GCQ3) on Tuesday closed down -23.50 (-1.19%), and July silver (SIN23) closed down -0.892 (-3.70%). Precious metals Tuesday retreated, with silver falling sharply to a 2-1/2 week low. A stronger dollar Tuesday weighed on precious metals. Also, hawkish central bank comments weighed on metals after ECB Governing Council member Rehn said inflation is falling only gradually, which bolsters speculation the ECB will continue to raise interest rates. Silver also fell on Chinese industrial metals demand concerns after the PBOC cut lending rates less than expected.
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.
