Dollar Remains Strong as U.S. Yields Hold Multi-year Highs

Dollar Remains Strong as U.S. Yields Hold Multi-year Highs


The dollar rose to a four-month high against the Japanese Yen and secured its gains against the rest major currencies. The strength in the US dollar is due to rise in Treasury yields on expectations that the Federal Reserve will raise interest rates at least two more times this year. The strong economic reports are backing up these expectations. The Initial Jobless Claims increased by 11,000 to 222,000 last week. However, the number of Americans on unemployment rolls fell to its lowest level since 1973 as it dropped by 87,000 to 1.71 million. The unemployment rate for April fell to 3.9% near a 17-year low, which confirms that the Labor market is close to full employment. Also, the Philadelphia Federal Reserve Manufacturing Index reached the highest in a year.


The economic reports from Japan continue to show weakness as the National CPI YoY rose less than expected. The Bank of Japan has been taking various stimulus measures to back up the economy and push inflation to its price target. Governor Koruda announced in the latest BoJ meeting, that inflation target will be attainable in the Fiscal year 2019 and they will continue with the same policy measures and go more aggressive if needed to reach that target. Oil prices could help the BoJ, as Japan is an oil importer and the appreciation in oil prices will lead to higher Import prices index and allow the inflation to pick up.


The talks between the US, Canadian, and Mexican negotiators failed to deliver a proper NAFTA deal before Yesterday’s deadline. According to President Donald Trump, the quarter-century agreement is a disaster and he threatened to withdraw from it. Canadian economic reports showed that the economy is growing at a proper pace. The Consumer Price Index and Retail sales  due today.


Gold is trading in a tight range near 2018 lows as the US dollar holds steady. Gold prices are down more than two percent this week, after facing pressures by the rising US treasury yields. Gold is now close to posting its largest weekly loss in five months.


Oil held steady near multi-year highs as markets participants expect stronger demand. Oil prices gained 70% in less than a year supported by the OPEC output plan and Geopolitical tensions. Investors are still predicting the effect of the Iranian Sanctions on oil supply. The Baker Hughes Rig Count is due today. US oil drillers added rigs for the past six consecutive weeks to reach the highest count since early 2015.

The most important economic events

GMT Country Event Expectation Previous
12:30 CA Core CPI (YoY) (Apr) 1.4% 1.4%
12:30 CA CPI (YoY) (Apr) 2.3% 2.3%
12:30 CA Core Retail Sales (MoM) (Mar) 0.5% 0.0%
17:00 US U.S. Baker Hughes Oil Rig Count   844.000


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