Dollar Falls Back as Stocks Recover

The dollar index ( DXY00 ) fell from a 2-month high today and is down by -0.14%.  The dollar gave up overnight gains and turned lower today after stocks pushed higher, which curbs liquidity demand for the dollar.  Also, crude prices fell from early highs today and dragged the dollar lower after Iran signaled an end to its current military operations against Israel and President Trump said the two sides were looking to agree to an immediate ceasefire. The dollar initially moved higher today on carryover strength from last Friday's stronger-than-expected US May payroll report, which bolstered speculation that the next Fed move will be an interest rate increase.  Also, renewed fighting between Iran and Israel boosted some early safe-haven demand for the dollar after Israel said it struck several military targets in Iran today, retaliating against missile attacks by Iran. The swaps markets are discounting the odds at +3% for a +25 bp rate cut hike at the next FOMC meeting on June 16-17. EUR/USD ( ^EURUSD ) recovered from a 2.25-month low today and is up by +0.14%.  The euro moved higher today after weakness in the dollar spurred short covering.  The euro also garnered support from today's stronger-than-expected Eurozone Jun Sentix investor confidence index. The euro initially moved lower today after crude oil prices jumped more than 4%, which is negative for the Eurozone economy and the euro, as Europe imports most of its energy.  Also, today's weaker-than-expected German April factory orders report was bearish for the euro. The Eurozone Jun Sentix investor confidence index rose +3.0 to -3.4, stronger than expectations of -14.0. German Apr factory orders fell -3.8% m/m, weaker than expectations of -2.0% m/m. The markets are discounting a +100% chance for a +25 bp rate hike by the ECB at the next policy meeting on Thursday. USD/JPY ( ^USDJPY ) today is down by -0.09%.  The yen recovered from a 5-week low against the dollar today on stronger-than-expected Japanese economic reports on Q1 GDP and the May Eco Watchers Outlook Survey.  Also, the closer the yen falls to 160 per dollar, the greater the likelihood that Japanese authorities will intervene in forex markets to prop up the yen, as they have done several times recently when the yen fell below that level. The yen initially moved lower today on early dollar strength and a brief +4% surge in crude oil prices, which is negative for Japan's economy and the yen as Japan imports more than 90% of its energy. The Japan May Eco Watchers Outlook Survey rose +1.3 to 40.7, stronger than expectations of 40.1. Japan's Q1 GDP was revised downward to 1.8% (q/q annualized) from 2.1%, stronger than expectations of 1.4%. The markets are discounting a +91% chance of a +25 bp BOJ rate hike at the next policy meeting on June 16. August COMEX gold ( GCQ26 ) today is down -16.40 (-0.38%), and July COMEX silver ( SIN26 ) is down -0.973 (-1.41%). Gold and silver prices today added to last Friday's sharp losses, dropping to 2.5-month lows. Precious metals have some negative carryover from last Friday's stronger-than-expected US May payroll report, which bolsters the outlook for a Fed rate hike, a bearish factor for precious metals prices.  Also, today's stock market recovery has reduced safe-haven demand for precious metals. Today's weaker dollar is supportive of metals.  Also, precious metals still have safe-haven support as the US and Iran have made little progress in talks over an interim peace deal, with clashes between Israel and Hezbollah militants ongoing in Lebanon. Recent fund liquidation of precious metals is bearish for prices, as long holdings in gold ETFs fell to a 5.5-month low on March 31 after climbing to a 3.5-year high on February 27.  Also, long holdings in silver ETFs fell to a 9.75-month low on Thursday after rising to a 3.5-year high on December 23. Strong central bank demand for gold is supportive of gold prices, following news that bullion held in China's PBOC reserves rose by +320,000 ounces to 74.96 million troy ounces in May, the largest monthly increase in 17 months, and the nineteenth consecutive month the PBOC has boosted its gold reserves. On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here . The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. This data feed is not available at this time.