The dollar index (DXY00) on Monday fell by -0.41%. The dollar Monday dropped to a 1-week low and posted moderate losses. The dollar Monday was under pressure from weaker-than-expected U.S. economic news on Mar ISM manufacturing and Feb construction spending. Also, lower T-note yields Monday weakened the dollar’s interest rate differentials.
Monday’s U.S. economic data was bearish for the dollar. The Mar ISM manufacturing index fell -1.4 to 46.3, weaker than expectations of 47.5 and the steepest pace of contraction in 2-3/4 years. Also, Feb construction spending unexpectedly fell -0.1% m/m, weaker than expectations of no change.
EUR/USD (^EURUSD) on Monday rose by +0.55%. The euro Monday recovered from a 1-week low and moved moderately higher. Dollar weakness Monday fueled short covering in the euro. Also, Monday’s Eurozone economic news boosted the euro after the Eurozone Mar S&P manufacturing PMI was revised upward. In addition, hawkish comments Monday from ECB Governing Council member Holzmann gave EUR/USD a boost when he said another 50 bp interest rate increase by the ECB is "still on the cards" for May.
The Eurozone Mar S&P manufacturing PMI was revised upward by +0.2 to 47.3 from the initially reported 47.1.
Hawkish ECB comments Monday were supportive of EUR/USD. ECB Governing Council member Holzmann said another 50 bp interest rate increase by the ECB is "still on the cards" for May if the turmoil in the banking system doesn't worsen. Also, ECB Vice President Guindos said, "we believe headline inflation is likely to decline considerably this year while underlying inflation dynamics will remain strong."
USD/JPY (^USDJPY) on Monday fell by -0.35%. The yen Monday recovered from a 2-week low against the dollar and posted moderate gains. A decline in T-note yields Monday was bullish for the yen. Also, an upward revision to the Japan Mar Jibun Bank manufacturing PMI to a 5-month high supported the yen. The yen Monday initially moved lower after the Japan Q1 Tankan large manufacturing business conditions fell more than expected to a 2-year low.
The Japan Mar Jibun Bank manufacturing PMI was revised upward by +0.6 to a 5-month high of 49.2 from the initially reported 48.6.
The Japan Q1 Tankan large manufacturing business conditions fell -6 to a 2-year low of 1, weaker than expectations of 3.
June gold (GCM3) on Monday closed up +14.20 (+0.71%), and May silver (SIK23) closed down -0.135 (-0.56%). Precious metals Monday settled mixed. Dollar weakness Monday supported metals after the dollar index fell to a 1-week low. Also, a decline in global bond yields Monday was bullish for metals prices. In addition, a surge in crude prices today to a 2-1/4 month high boosted demand for gold as a hedge against inflation. Silver prices gave up their advance and turned lower after Monday’s economic news showed manufacturing activity in the U.S. and China slowed more than expected last month, a bearish factor for industrial metals demand.
