The US dollar index (DXY00) advanced 0.35% on Thursday, bolstered by widening US interest rate advantages. The 10-year Treasury yield climbed 4 basis points to a 1.5-year peak, while Brent crude futures surged over 6% during the session. A slightly tighter-than-expected US jobless claims report further supported the greenback.
The currency also drew safe-haven flows after Iran-aligned Houthi forces attacked two Saudi oil tankers in the Red Sea, widening supply disruptions beyond the Strait of Hormuz and threatening key shipping lanes. President Trump said he plans to hold Iran accountable, telling Axios he is weighing a “massive attack” that would be “bigger than ever before” and is “close to making a decision on it.”
The Houthis have threatened to blockade vessels tied to Saudi Arabia and warned shippers to avoid the kingdom’s ports, jeopardizing exports from the Red Sea hub of Yanbu. Meanwhile, the US and Iran continued their exchange of strikes for a twelfth consecutive day, and Washington maintained its blockade of Iranian oil shipments in the Persian Gulf.
Markets are currently pricing in a 36% chance of a 25 basis point rate hike at the next Federal Reserve meeting on July 28–29.
EUR/USD (^EURUSD) declined 0.33% on dollar strength, though the euro carried underlying support as the German 10-year bund yield climbed to a 15-year high, reflecting rising oil prices and inflation concerns.
The European Central Bank held its key deposit rate steady at 2.25% on Thursday, consistent with expectations. The bank stated it is waiting for further data before deciding on additional hikes, but ECB President Christine Lagarde warned that “risks to the inflation outlook are to the upside.” Market participants are now assigning a 92% probability to a 25 basis point ECB hike at its next meeting on September 10.
USD/JPY (^USDJPY) rose 0.41% as the dollar strengthened, with the yen hitting a fresh 39-year low against the currency. The move has raised the risk of Japanese authorities intervening in forex markets; historically, intervention has occurred when the yen crosses 160 per dollar, a level reached on the day.
The probability of a 25 basis point Bank of Japan rate hike at the July 31 meeting is now being discounted at 2%.
August COMEX gold (GCQ26) fell sharply by 101.70 dollars (-2.45%), and September COMEX silver (SIU26) declined 2.244 dollars (-3.72%).
Precious metals dropped amid a stronger dollar and rising US and European bond yields, though they retained underlying safe-haven support after the Houthi strikes on Saudi tankers extended the conflict to the Red Sea.
Recent fund liquidations weigh on prices, as gold ETF long positions sank to a 9.75-month low on Monday, down from a 3.5-year high on February 27. Silver ETF long holdings similarly dropped to a one-year low last Tuesday, compared to a 3.5-year high on December 23.
Ongoing strong demand from central banks is supporting gold, with Chinese PBOC reserves increasing by 480,000 ounces to 75.44 million troy ounces in June, marking the twentieth consecutive month of additions.
On the date of publication,
Rich Asplund
did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes.
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