The U.S. dollar index (DXY) surged to a 2.5-week high, closing up 0.47% on Friday, driven by robust economic indicators and rising crude oil prices. The May Empire manufacturing survey revealed a surprising increase in general business conditions, jumping by 8.6 points to a four-year high of 19.6, while April manufacturing production rose by 0.6% month-over-month, exceeding expectations. Meanwhile, the 10-year Treasury yield reached an 11.75-month high of 4.60%, enhancing the dollar’s appeal.
In the Forex market, the euro fell to a five-week low against the dollar, down 0.41%, primarily due to the stronger dollar and a 4% spike in crude oil prices, which negatively impacts the Eurozone economy. In response to shifting economic conditions, swaps indicate an 89% probability of a 25 basis point rate hike by the European Central Bank at the upcoming meeting on June 11. Conversely, the Japanese yen weakened to a two-week low against the dollar, pressured by the dollar’s strength and high crude oil prices, although it showed some resilience amid rising Japanese bond yields.
In commodity markets, gold prices plummeted by 2.63%, hitting a 1.5-week low, while silver fell 9.12%, the lowest in a week. The decline in precious metal prices follows the dollar index rally and increasing global bond yields. Additionally, India recently doubled tariffs on gold and silver imports, which is anticipated to dampen demand. Despite these pressures, central bank demand remains strong, with China’s gold reserves increasing by 260,000 ounces to 74.64 million troy ounces in April, marking the largest monthly rise in a year.
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