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Dollar Retreats From Five-Month High on Lower Yields

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USD

The dollar index tumbled from a five-month high to end a five-day consecutive winning streak. The dollar was boosted by the rise of the US Treasury yields to multi-year highs due to the strong outlook of the United States Economy. In addition, the relief of the trade war tension between the US and China favored the US dollar. The pullback in the Treasury yields pressed investors to book some profits, leading to a small drop in the dollar against its peers.

EUR

The Euro rebounded up from 2018 lows on hopes that the political risks from Italy will fade. The Common currency tumbled more than five percent since mid-April as first-quarter economic reports were disappointing. The soft economic data will urge the European Central bank to delay its tapering program which will cause a divergence in the monetary policy stance between the Federal Reserve and the European Central Bank. Moreover, the Euro was pressured by the talks that Italy will hold a referendum on its membership in the European Union. Italy might clash with other European countries over budget rules due to higher spending plans.

 GBP

GBP/USD dropped below $1.34 for the first time since December 28th. The British pound dropped almost seven percent in a month as the economic reports failed to impress investors and the Monetary Policy Committee. The busy economic calendar from the United Kingdom kicks-off today with the inflation Report hearings, where the Bank of England Governor and MPC members testify on inflation and economic outlook.

Gold

Gold prices tumbled in early trading on Monday, as investors favored risky assets to the gold safe-heaven. However, gold was able to reverse a one percent drop to end the day near the opening levels as the US Treasury yields dropped to the end of the day. Gold traders will be waiting for the Federal Reserve Open Market Committee Meeting Minutes tomorrow, to grasp details about the US economic outlook and future rate moves.

Oil

Oil prices continued to post new Multi-year highs on supply worries. Venezuela’s socialist president Nicolas Maduro was re-elected which raises the chances of the United States imposing oil sanctions on the country. Venezuela’s output dropped almost thirty percent in the past two years to reach the lowest in decades due to the political turmoil. The US crude Inventory from the American Petroleum Institue is due today.

Major Economic Events

GMT Country Event Expectation Previous
9:00 UK Inflation Report Hearings     
10:00 UK CBI Industrial Trends Orders (May) 2 4
20:30 US API Weekly Crude Oil Stock   4.854M


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