US Dollar Index (DXY) Hampered By Strong Euro Tone

Although the dollar index has edged higher, strength in the Euro is likely to be a key factor in limiting the scope for gains in the currency index with only very limited gains realistic.

The US job-openings data was weaker than expected with a decline to 5.67mn for May from a revised 5.97mn the previous month which was notably below expectations, although there was an increase in both hires and the quits rate which suggests that the labour market remains robust.

US Treasuries were unable to hold in positive territory after the data with the 10-year yield back above 2.38% and the overall US yield curved underpinned the dollar.

The US currency edged higher against the yen with a further test of the 114.50 area in USD/JPY. The dollar also made significant headway against Sterling which was undermined by a lack of rhetoric on monetary policy by Bank of England Deputy Governor Broadbent.

Commodity currencies were also unable to make headway against the US currency with the New Zealand dollar a notable under-performer.

The dollar index was, however, held back by small-scale losses against the Euro as EUR/USD moved back above the 1.1400 level.

There were no major Euro-zone developments, although the speech from ECB member Coeure hinted that potential gains in the Euro would not be a barrier to removing some of the policy accommodation.

Given the high Euro weighting in the dollar trade-weighted basket, the firm single-currency tone was important in holding back the dollar index which was unable to break above the 96.00 level.

Movement is likely to be limited ahead of Wednesday’s congressional testimony from Fed Chair Yellen.

Dollar Index (DXY)

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.