The dollar index (DXY00) Tuesday rose by +0.13%. The dollar recovered from early losses Tuesday and moved higher on signs of progress in the US-China trade talks. On Monday evening, President Trump stated that the US was "doing well with China" and that he was "only getting good reports" on the talks.
Gains in the dollar were limited Tuesday after the World Bank cut its 2025 global growth outlook. Also, lower T-note yields Tuesday weakened the dollar's interest rate differentials.
The World Bank on Tuesday cut its 2025 global GDP forecast to +2.3% from a +2.7% estimate in January due to trade tensions and policy uncertainty.
The markets are discounting the chances at 0% for a -25 bp rate cut after the June 17-18 FOMC meeting.
EUR/USD (^EURUSD) Tuesday rose by +0.07%. The euro posted modest gains on Tuesday after the Eurozone June Sentix investor confidence index rose more than expected to a 1-year high. Also, hawkish comments from ECB Governing Council member Holzmann boosted the euro when he said the ECB may keep interest rates on hold into the autumn.
The Eurozone June Sentix investor confidence index rose +8.3 to a 1-year high of 0.2, stronger than expectations of -5.5.
ECB Governing Council member Holzmann said, "The inflation goal is already in reach, so for me it makes sense for the ECB to not cut rates until autumn, to be sure that the uncertainty we have everywhere about the economy, we don't experience another bout of inflation."
Swaps are discounting the chances at 13% for a -25 bp rate cut by the ECB at the July 24 policy meeting.
USD/JPY (^USDJPY) Tuesday rose by +0.20%. The yen fell to a 1-1/2 week low against the dollar Tuesday on dovish comments from BOJ Governor Ueda, who said Japan's price trend still has some ways to go to reach 2%. Losses in the yen were contained after Japan's May machine tool orders rose for the eighth consecutive month. Also, lower T-note yields on Tuesday gave the yen a boost.
Japan May machine tool orders rose +3.4% y/y, the eighth consecutive month orders have risen.
BOJ Governor Ueda said the BOJ is still "some distance" from its 2% inflation goal, and it will keep raising interest rates if it becomes confident enough about improvement in the price trend.
August gold (GCQ25) Tuesday closed down -11.50 (-0.34%), and July silver (SIN25) closed down -0.154 (-0.42%). Precious metals on Tuesday gave up an early advance and settled lower as strength in the dollar weighed on prices. Also, Tuesday's strength in stocks curbed safe-haven demand for precious metals. In addition, signs of progress in US-China trade talks are reducing safe-haven demand for precious metals after President Trump stated that the US was "doing well with China" and that he was "only getting good reports" on the talks.
Precious metals on Tuesday initially garnered support from lower global bond yields. Also, dovish comments from BOJ Governor Ueda boosted demand for precious metal as a store of value when he said the BOJ is still "some distance" from its 2% inflation goal, suggesting the BOJ will not raise interest rates in the near term. Tuesday's weak labor news from the UK may prompt the BOE to cut interest rates, a bullish factor for precious metals, after UK May payrolled employees fell by 109,000, the biggest decline in five years. In addition, continued buying of gold by China's central bank is bullish for gold prices, following the PBOC's report on Saturday that it added 60,000 troy ounces of gold to its reserves in May, marking the seventh consecutive month of gold holdings growth. Finally, precious metals prices have continued safe-haven support from global trade tensions and geopolitical tensions in Ukraine and the Middle East.
Silver prices were supported Tuesday by global economic news that showed the Eurozone June Sentix investor confidence index rose to a 1-year high, and Japan's May machine tool orders rose for the eighth consecutive month, positive factors for industrial metals demand. Fund buying is also supporting gains in silver after silver holdings in ETFs rose to a 2-year high Monday. However, silver prices gave up their advance Tuesday and moved lower after the World Bank cut its 2025 global GDP forecast, a bearish factor for industrial metals demand.
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.
