Dollar Index Posts Fresh 2018 Highs on Firmer Treasury Yields


The dollar index climbed to a new 2018 high on Wednesday as the US treasury yields advanced to multi-year highs. The strong economic reports are confirming that the United States economy is resilient and supports the stance of the monetary policy of the Federal Reserve. Treasury yields are bolstered by the expectations that the Federal Reserve will hike interest rates three more times this year. However, the Fed member Bullard declared yesterday that they are close to neutral rates and raising interest rates further could be restrictive. Such statements from the Fed members will suggest that they are weighing the effect of the interest rates on the stock market.


The Euro traded lower yesterday to find support at the 78.6% Fibonacci retracement of the move from $1.1555 to $ 1.2556, the lowest since December 18th. The Common currency is facing pressures from the rising political uncertainty in Italy. The Consumer Price Index was due yesterday where the YoY readings were unchanged. Additionally, the Euro is under pressure because of the increasing gap between the bond yields of the United States and Eurozone.


The Canadian Dollar is indecisive ahead of the informal NAFTA talks deadline. The Loonie has been sensitive for this topic, as any press releases or statements regarding NAFTA increased the volatility. President Donald Trump threatened to withdraw from the NAFTA, but on Tuesday, he confirmed that reaching a deal is essential. Trump planned before to rewrite the deal, but according to the negotiators it will be difficult and might exceed the deadline.


Gold prices are steady near 2018 lows, disregarding some short covering that occurred earlier on Wednesday. The precious metal is facing pressure due to the soaring Treasury yields, that are increasing the opportunity cost of the bullion holders.


Oil prices rose to the highest levels since Nov 2014 on a decreasing supply and a strong demand. The Energy Information Administration reported that the US crude oil inventories dropped by 1.4 million barrels last week to a total of 432.34 million barrels.

The most important economic events:

GMT Country Event Expectation Previous
12:30 US Initial Jobless Claims 215 211
12:30 US Philadelphia Fed Manufacturing Index (May) 21.0 23.2


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