The dollar index (DXY00) slipped to a one‑week low on Monday, ending the session down 0.09%. The currency faced pressure as equities rallied sharply following the U.S. and Iran’s announcement of a peace agreement, reducing demand for dollar liquidity. Additionally, the 10‑year Treasury yield fell to a one‑month low, narrowing interest‑rate differentials in favor of the dollar. A 4 % drop in WTI crude to a three‑month trough further weighed on the greenback by lowering inflation expectations and potentially prompting a more accommodative stance from the Federal Reserve. The dollar also suffered from weaker‑than‑expected U.S. economic data, including the June Empire State Manufacturing survey, May manufacturing production, and the June NAHB housing market index.
The currency retreated after the two nations agreed to end hostilities and reopen the Strait of Hormuz. President Trump indicated that the strait would reopen following the signing of the peace deal, which will initiate a 60‑day series of talks on Iran’s nuclear program.
The June Empire State Manufacturing survey of general business conditions fell to 5.7, missing expectations of 13.7. U.S. May manufacturing production was flat month‑over‑month, also below the forecasted 0.3 % increase. Swaps markets are pricing a 4 % probability of a 25‑basis‑point rate cut at the June 16‑17 FOMC meeting.
EUR/USD rose 0.22 % to a one‑week high, benefitting from the dollar’s weakness. The decline in oil prices supports the euro, as Europe imports most of its energy. ECB Governing Council member Martins Kazaks’ hawkish remarks—emphasizing readiness to act against rising energy‑driven inflation—also buoyed the euro.
Eurozone industrial production in April increased 0.1 % month‑over‑month, in line with expectations. Markets are assigning an 18 % chance of a 25‑basis‑point rate hike at the ECB’s July 23 meeting.
USD/JPY edged up 0.04 % on Monday. The yen lost some safe‑haven appeal after the Nikkei hit a record high and after the U.S.–Iran peace announcement depressed oil prices, which benefits the Japanese economy. A decline in Treasury yields also supported the yen, while expectations of a BOJ rate hike at Tuesday’s policy meeting add upward pressure.
Japan’s April tertiary industry index rose 1.3 % month‑over‑month, beating the 0.6 % forecast. Markets see a 99 % probability of a 25‑basis‑point BOJ rate increase at the upcoming meeting.
August COMEX gold closed up 2.66 % (+$112.80), and July COMEX silver rose 3.25 % (+$2.206). Precious metals posted one‑week highs, helped by the dollar’s slide, lower global bond yields, and a 4 % drop in crude oil that reduced inflation expectations. However, higher equity markets and expectations of a BOJ rate hike provided headwinds. Recent fund outflows have also been bearish, with gold ETF holdings hitting a six‑month low and silver ETF holdings a ten‑month low.
Strong central‑bank demand continues to support gold, highlighted by China’s PBOC increasing its reserves by 320,000 ounces in May—the largest monthly addition in 17 months and the nineteenth consecutive month of net purchases.
