Dollar Trims Gains as Yields Move Lower, Stocks Rally

USD

The dollar index which measures the greenback against a basket of major currencies drifted lower to 89.90, giving up on part of the gains earned late last week. The greenback earned a push higher by strong economic data, where the initial jobless claims came out at their lowest levels since the beginning of the pandemic, and the services and manufacturing PMI shot higher. However, if we assess the bigger picture, the Federal Reserve is not looking for any change in policy at the moment. Coming economic data such as the PCE Price index, the Fed's favorite inflation gauge, and the May jobs report could shift the bias on the policy path. The US 10-year yields remained soft, falling to 1.611% again. The EURUSD inched higher to $1.2197, the GBPUSD rallied to $1.4166, and the USDJPY dipped to 108.69.

Equities

Futures tied to major US stock indices raced higher during the first trading hours of the week. The strong economic data, the continuous efforts of Biden's administration towards further fiscal stimulus, and Powell's quantitative easing are helping the buy-the-dip strategy in stocks. Investors will be looking carefully for economic data that would come out in these two weeks to which could trigger any changes for Fed's tone about policy. The Dow Jones Industrial Average futures rose to 34336, the S&P500 futures rallied to 4172, and Nasdaq futures advanced to 13478.

Metals

Gold prices continued to move higher after logging their highest weekly close since early January. The US dollar weakness amid prospects of the Fed's unwillingness to change policy boosted precious metals prices. The price of a gold ounce rose to $1889, the price of a silver ounce appreciated to $28.75, while palladium fell to $2767.

Oil

Oil prices edged higher to extend recovering from last week's losses. The chatters about a possible deal between the World's superpowers and Iran weighed on prices, as it could lead to additional supply from Iran. On the other hand, investors are optimistic about the current economic progress where the manufacturing PMI in the United States, United Kingdom, and the Eurozone ticked higher in May. The West Texas Intermediate crude July contract rose to $64.51, and the Brent blend July contract rallied to $67.44.

Major Economic Events