US dollar plumbs three-year nadir after Trump's new threats
Recent trade threats by US President Trump sent the dollar to a three-year nadir on Thursday amid increasing investor concerns, with Trump saying he is sending messages to the US trade partners, specifying the new tariffs in the next few weeks as the 90-day pause approaches an end.
The dollar lost 0.8% against a basket of major rivals, falling below the level it reached after the Liberation Day wave of losses in early April.
As for Iran, Trump threatened once more that Iran can not acquire nuclear weapons.
Despite the ongoing tensions, stocks recovered from their steep April losses, with the S&P 500 approaching a new record high, but the Stoxx Europe 600 index tumbled 0.9% on Thursday.
Recent US inflation data, which missed expectations, heaped pressure on the dollar and opened the door for a Fed rate cut in September.
The dollar lost 10% of its total value this year amid increasing economic concerns due to the trade war and US government deficits.
The recently released US consumer prices report showed a muted impact of tariffs on inflation so far in May, but economists still expect a rise in upcoming months.
On Wednesday, the US administration decided to withdraw some personnel from the Middle East amid increasing security threats, sending oil prices up 4% temporarily.
Iran on the other hand asserted it won’t give up its right to enrich uranium and threatened military actions against US military bases.
Gold moves in a positive zone as the dollar dips
Gold prices rose in European trade on Thursday on track for the second daily profit in a row as the dollar fell against major rivals.
The development came after US inflation missed estimates in May, reducing inflationary pressures on the Fed’s policymakers and bolstering the odds of a September rate cut.
The Price
Gold prices rose 0.75% to $3377 an ounce, with a session-low at $3338.
On Wednesday, gold rose 0.95%, the second profit in three days after weak US consumer prices data.
US Dollar
The dollar index fell 0.35% on Thursday, on track for the second loss in a row, plumbing a two-month trough at 98.25 against a basket of major rivals.
A weaker dollar makes the greenback-denominated gold futures cheaper to holders of other currencies.
The US and China reached a trade framework in London after two days of intensive negotiations, with representatives waiting for the final approval of Trump and Xi Jinping to move forward.
Trump said China will supply rare-earth minerals and magnets to the US, and will get chip exports from America, with restrictions on Chinese students in US universities will be lifted as well.
US Rates
Recent data showed US inflation rose less than expected in May, with limited effects so far for Trump’s tariffs on prices.
Following the data, traders raised their estimates for a Federal Reserve rate cut in September.
Now traders await US producer prices data later today to gather even more clues.
SPDR
Gold holdings at the SPDR Gold Trust fell 1.72 tons yesterday to a total of 934.19 tons, the lowest since June 2.
Euro expands gains to two-month high amid positive outlook
The euro rose in European trade on Thursday against a basket of major rivals, expanding gains for the fourth straight session against the US dollar and hitting a two-month high amid a strong outlook for more gains as the odds of an ECB rate cut in July diminished.
US inflation missed estimates in May, reducing pressures on the Fed’s policymakers and boosting the odds of a September rate cut.
The Price
The EUR/USD price rose 0.45% to $1.1539, an April 22 high, with a session-low at $1.1483.
The euro rose 0.5% on Wednesday against the dollar, marking the third profit in a row following US inflation data.
European Rates
ECB President Christine Lagarde hinted at the possible end of the current cycle of policy easing, which was in response to a combined shock such as the Covid 19 pandemic, the Ukrainian war, and the energy crisis.
According to a Reuters source, most ECB members now aim at holding interest rates unchanged in July, with the global markets now expecting just an additional 25 basis points of rate cuts by the end of the year.
The odds of a 0.25% ECB rate cut in July now stood below 30%, with traders awaiting more eurozone data and remarks by ECB officials to gather more clues.
US Rates
Recent data showed US inflation rose less than expected in May, with limited effects so far for Trump’s tariffs on prices.
Following the data, traders raised their estimates for a Federal Reserve rate cut in September.
Now traders await US producer prices data later today to gather even more clues.