US Dollar and Yields Rally, Inflation Data Eyed


The dollar index which measures the US dollar performance against a basket of the world's major currencies inched higher during the Asian session to 90.16, turning into the positive territory on the week. Market participants are looking forward to the PCE index, the Federal Reserve's favorite inflation gauge, the consensus is an increase of 2.9% on core reading year-on-year basis, which is way higher than the previous reading of 1.8%. This reading is important as a series of positive surprises in the PCE index could trigger the urge to act to curb inflation. On the other hand, the second reading of the first-quarter GDP was the same as the preliminary reading at 6.4%, and the initial jobless claims rose by only 406 thousand, the lowest since the pandemic started. The US 10-year yields moved higher to 1.623%, the USDJPY rallied to 109.95, the highest since early April, and the EURUSD declined to $1.2170. 


Futures tied to major US stock indices raced higher amid improving economic data. The solid reading of a 6.4% growth during the first quarter raised investors' optimism over the economic recovery. The vaccination program is keeping a good pace, and the fiscal and monetary policies are still in place to support the recovery. However, today's inflation reading and personal income are among the key drivers for the market. The Dow Jones Industrial Average futures rose to 34617, the S&P500 futures rallied to 4216, and Nasdaq futures hovered near 13713.


Precious metals prices drifted lower as the dollar and Treasury yields picked up ahead of the PCE index release. The indicator's release is a live event for markets, where a soaring number could drive yields higher, and depending on how the Fed will perceive the number, gold prices will react. The price of a gold ounce dipped to $1888, the price of a silver ounce fluctuated near $27.70, while palladium bounced to $2806.


Oil prices inched higher with the WTI hitting its highest level since March. The optimism about the economic recovery in the United States, Europe, and the United Kingdom is supporting prices as the nuclear deal talks are still in check. The West Texas Intermediate crude July contract rose to $67.43, and the Brent blend August contract rallied to $69.83. The spread between the Brent and West Texas Intermediate active contracts fell to $2.28, the lowest since November 2020.

Major Economic Events

GMT Country Event Expectation Previous



 Core PCE Price Index (YoY) (Apr)





 Personal Income (MoM) (Apr)





 Chicago PMI (May)





 Michigan Inflation Expectations (May)





U.S. Baker Hughes Oil Rig Count




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