The U.S. dollar index (DXY) surged to a 1.75-month high, increasing by 0.35% on June 1, 2023, fueled by a stronger-than-expected May payroll report showing nonfarm payrolls rose by 172,000—significantly above the anticipated 88,000. The unemployment rate held steady at 4.3%, and average hourly earnings rose by 0.3% month-over-month. Speculation is growing regarding a potential 25 basis point interest rate hike at the Federal Reserve’s next meeting on June 16-17, with only a 1% chance of a rate cut priced in by the swaps market.
In Europe, the euro fell to a 1.75-month low against the dollar after Eurozone Q1 GDP was revised downward to 0.3% year-over-year, reflecting bearish economic signals. The market expectations lean towards a 99% likelihood of a 25 basis point hike by the European Central Bank at its upcoming meeting on June 11. Additionally, the yen weakened to a five-week low against the dollar after Japan’s April household spending fell by 0.5%, although labor cash earnings rose by 3.5% year-over-year.
Amid these developments, precious metals faced downward pressure, with gold and silver prices reaching 1-week and 1.75-month lows, respectively. This decline is partly attributed to a strong dollar and rising global bond yields. However, safe-haven demand remains due to ongoing geopolitical tensions between the U.S. and Iran, and clashes between Israel and Hezbollah. Notably, China’s central bank has increased its gold reserves by 260,000 ounces, marking the most significant monthly gain in a year.
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