Dollar Holds Gains; Gold Plunges


The dollar index which measures the performance of the United States dollar against a basket of the world's major currencies held steady near 90.50, protecting Friday's gains. The greenback rallied significantly against rivals where the index added 0.5%. Last week, the US Consumer Price Index shot higher raising investors woes over inflation, while the Fed considers it transitory. On the other hand, the Michigan Inflation Expectation preliminary reading came in at 4.0%, well below the last reading of 4.6%. The Federal Reserve is kicking off a two-day meeting tomorrow to decide on monetary policy stance. Market participants will be focusing on the Fed's opinion over the soaring inflation and the last two job reports. The EURUSD fell to $1.2094, the lowest in a month, the GBPUSD dropped to $1.4093, and the USDCAD advanced to 1.2177.


Precious metals prices fell significantly on Friday, and the soft performance continued during today's Asian session. The easing inflation expectation reading by the University of Michigan and the recovering US yields weighed on metals. The price of a gold ounce plunged to a ten-day low of $1857, the price of a silver ounce declined to $27.71, and palladium eased to $2765.


Futures tied to major US stock indices continued to have a mixed performance due to falling yields. The recent sharp drop in the US Treasury yields supported tech stocks, which are known to be highly leveraged and benefit from lower interest rates, while the Dow Jones was flat, as the energy sector outperformed and the financial sector plunged. The Tech-heavy Nasdaq traded at 14035, slightly short from hitting an all-time high, the S&P500 futures closed at a record high of 4248, while the Dow Jones Industrial Average futures held steady below 34500.


Oil prices extended their upside rally settling higher for the third consecutive week amid optimism over the global economic recovery. Many countries are moving forward with lifting movement restrictions, supporting the oil-demand recovery. On the other hand, until now the world's superpowers and Iran failed to reach a nuclear deal, delaying additional market supply. The West Texas Intermediate crude July delivery rose to $71.55, and the Brent blend August contract rallied to $73.48.

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