The U.S. dollar index rose 0.06% on Wednesday, June 14, 2023, driven by a 2% increase in crude oil prices, which boosted inflation expectations and prompted speculation of a tighter monetary policy from the Federal Reserve. May’s consumer price index (CPI) rose 4.2% year-over-year, the fastest in three years, while core CPI increased by 2.9% year-over-year, hitting a seven-month high.
The ongoing conflict between the U.S. and Iran further supported the dollar as safe-haven demand surged amidst military escalations. The U.S. retaliated with airstrikes on Iranian positions following an incident involving the downing of a U.S. helicopter, escalating tensions in the region. Markets are currently pricing in a 99% chance of a 25 basis point rate hike by the European Central Bank (ECB) and a 100% chance for a similar increase by the Bank of Japan (BOJ) during their respective meetings.
In the metals market, gold and silver prices fell, with gold dropping to a 6.5-month low. Long holdings in gold ETFs are at a 5.5-month low, as global inflation concerns and interest rate hike expectations weigh heavily on precious metal prices. Meanwhile, China’s PBOC reported its gold reserves increased by 320,000 ounces, marking the largest monthly rise in 17 months.
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