Dollar Boosted by Trade Hopes and Rising Bond Yields

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### Current Trends in the U.S. Dollar and Economic Indicators

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Today, the dollar index (DXY) experiences a slight increase of 0.18%, building on gains from earlier this week. This boost comes after President Trump’s recent decision to push back the implementation of a 50% tariff on U.S. imports from the European Union by approximately five weeks, moving the deadline from June 1 to July 9. Additionally, rising yields on Treasury notes are contributing to the dollar’s strength.

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However, this upward momentum is somewhat tempered by last Thursday's developments. The House passed a tax and spending proposal from President Trump, which raises concerns about increasing the nation's budget deficit.

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In terms of manufacturing activity, the Richmond Fed’s survey for May recorded an increase of 4 points, aligning with market expectations as it rose to -9. Market participants are currently assessing a mere 2% probability of a 25 basis point rate cut following the Federal Open Market Committee (FOMC) meeting scheduled for June 17-18.

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When looking at the euro against the dollar, the EUR/USD pair is down by 0.11%. The dollar's strength is negatively impacting the euro, particularly in light of disappointing economic data from Germany. Notably, unemployment rose by more than anticipated in May, and April import prices saw a sharper than expected decline, both of which are seen as dovish indicators for European Central Bank (ECB) policies. That said, the euro’s losses aren’t entirely unchecked, as the ECB’s new one-year CPI expectations reached their highest level in 14 months, which may suggest a shift toward more hawkish monetary policy.

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The German unemployment rate for May increased by 34,000, significantly above the forecast of 12,000, marking the largest rise in nearly three years. The unemployment rate itself remains stable at 6.3%. Meanwhile, the import price index for Germany showed a decline of 1.7% month-over-month in April, surpassing the forecast of a 1.4% drop and representing the steepest fall in over two years. Market swaps are indicating a 98% likelihood of a potential 25 basis point rate cut by the ECB during the upcoming June 5 policy meeting.

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Turning our attention to the yen, USD/JPY is up by 0.24%. The yen is continuing to decline after experiencing significant losses earlier this week. The negative sentiment was amplified by a report from Bloomberg News, revealing that Japan’s finance ministry has been inquiring about suitable government bond issuance amounts. This suggests a potential reduction in debt issuance. Additionally, rising Treasury yields are adversely affecting the yen’s value.

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In commodities, gold prices for June are slightly up by 0.12%, while July silver has seen a minor decrease of 0.06%. The performance of precious metals is currently mixed following significant losses on Tuesday. The demand for gold as a hedge against inflation has seen an uptick, particularly following the ECB's CPI expectations showing a stronger-than-expected increase. However, precious metals are also facing headwinds, including a stronger dollar and higher global bond yields. Silver prices are coming under pressure as concerns over escalating trade tensions might dampen economic growth and reduce demand for industrial metals.

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Overall, these economic indicators and trends are shaping the landscape of U.S. dollar performance, European economic sentiment, and the outlook for both currencies and commodities.

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