The dollar index (DXY00) Tuesday rose by +0.53%.  The dollar on Tuesday recovered from a 6-week low and moved higher after weaker-than-expected Eurozone inflation news knocked the euro lower.  Also, weakness in the yuan supported gains in the dollar after a gauge of Chinese manufacturing activity contracted in May be the most in more than 2-1/2 years.  The dollar added to its gains Tuesday after US Apr JOLTS job openings unexpectedly increased and after Atlanta Fed President Bostic said he’s in no rush to cut interest rates.  Gains in the dollar were limited after the OECD cut its global 2025 GDP forecast and after US Apr factory orders fell more than expected by the most in 15 months, dovish factors for Fed policy.

US Apr JOLTS job openings unexpectedly rose +191,000 to 7.391 million, showing a stronger labor market than expectations of a decline to 7.100 million.

US Apr factory orders fell -3.7% m/m, weaker than expectations of -3.2% m/m and the biggest decline in 15 months.

Atlanta Fed President Bostic said he’s in no rush to cut interest rates as “there’s still a way to go in terms of progress on inflation.” 

The Organization for Economic Cooperation and Development (OECD) cut its global 2025 GDP forecast to 2.9% from a March forecast of 3.1%, citing the impact of tariffs and uncertainty on confidence and investment.

The China May Caixin manufacturing PMI unexpectedly fell -2.1 to 48.3, weaker than expectations of an increase to 50.7 and the steepest pace of contraction in more than 2-1/2 years.

The markets are discounting the chances at 1% for a -25 bp rate cut after the June 17-18 FOMC meeting.

EUR/USD (^EURUSD) Tuesday fell from a 6-week high and finished down by -0.60%.  The euro retreated Tuesday after an ECB-friendly Eurozone May CPI report bolstered expectations for additional ECB interest rate cuts.  Also, Tuesday’s rebound in the dollar from a 6-week low to higher on the day weighed on the euro.   In addition, expectations that the ECB will cut interest rates by -25 bp at Thursday’s policy meeting are negative for the euro. 

Eurozone May CPI eased to +1.9% y/y from +2.2% y/y in Apr, better than expectations of +2.0% y/y and the slowest pace of increase in 8 months.  May core CPI eased to +2.3% y/y from +2.7% y/y in Apr, better than expectations of +2.4% y/y and the slowest pace of increase in 3-1/3 years.

The Eurozone Apr unemployment rate fell -0.1 and matched the record low of 6.2%, right on expectations.

Swaps are discounting the chances at 96% for a -25 bp rate cut by the ECB at Thursday’s policy meeting.

USD/JPY (^USDJPY) Tuesday rose by +0.90%.  The yen gave up an early advance Tuesday and retreated against the dollar on dovish comments from BOJ Governor Ueda, who said he won’t push for higher interest rates unless the economy is strong enough to take it.  The yen on Tuesday initially moved higher after BOJ Governor Ueda hinted the BOJ may continue to cut its purchase of government bonds. 

BOJ Governor Ueda said, “We have no intention of forcefully raising the policy rate only to make room for future rate cuts when improvement in economic and price conditions is not anticipated.”

BOJ Governor Ueda hinted the BOJ may continue to cut its purchase of government bonds when he said, “Many opinions indicated that it’s appropriate to keep cutting the bond purchases while balancing predictability and flexibility.”

August gold (GCQ25) on Tuesday closed down -20.10 (-0.59%), and July silver (SIN25) closed down -0.061 (-0.18%).  Precious metals on Tuesday moved lower due to a rising dollar.  Also, comments on Tuesday from BOJ Governor Ueda, who hinted the BOJ may continue to cut its purchase of government bonds, were bearish for precious metals.  Losses in precious metals accelerated Tuesday after US Apr JOLTS job openings unexpectedly rose, a hawkish factor for Fed policy, and after Atlanta Fed President Bostic said he’s in no rush to cut interest rates. 

Silver was also under pressure Tuesday on concerns over industrial metals demand after the OECD cut its global 2025 GDP forecast for the second time this year and after the China May Caixin manufacturing PMI unexpectedly contracted by the most in more than 2-1/2 years.

Limiting losses in precious metals were limited Tuesday as the Eurozone May CPI report showed easing price pressures, which bolstered expectations for the ECB to keep cutting interest rates, a supportive factor for precious metals.  In addition, dovish comments Tuesday from BOJ Governor Ueda supported demand for precious metals as a store of value when he said he won’t push for higher interest rates unless the economy is strong enough to take it. Finally, precious metals prices have continued safe-haven support from uncertainty about global trade relations and geopolitical tensions in Ukraine and the Middle East.