Trade Tensions Drive Dollar Higher

The dollar index rose by +0.30% to a 1.5-week high due to liquidity demand and President Trump’s tariff hike plans for several countries. President Trump signed a reconciliation bill into law that may add $3.4 trillion to US budget deficits. Markets are discounting a 5% chance of a -25 bp rate cut at the July FOMC meeting.

EUR/USD fell by -0.48% to a 1-week low on Monday, influenced by dollar strength and weaker Eurozone economic data. The Eurozone’s July Sentix investor confidence index rose to a 3.5-year high, while May retail sales fell more than expected. German May industrial production unexpectedly rose.

USD/JPY rose by +1.11% as the yen tumbled to a 2-week low against the dollar. President Trump’s raised tariffs on Japanese exports and higher T-note yields contributed to the yen’s weakness. The Japan May leading index CI exceeded expectations, while May labor cash earnings were weaker than expected.

August gold and September silver closed down on Monday due to a stronger dollar and higher global bond yields. Precious metals experienced pressure from industrial metals demand concerns after President Trump announced additional tariffs. Precious metals recovered losses as trade tensions increased safe-haven demand and fund buying of silver supported prices.

Read more at Yahoo Finance: Dollar Rises as Trade Tensions Undercut Stocks