On the foreign exchange market, the dollar rebounded Tuesday after touching the day before its lowest in three months. The dollar index (which measures its evolution against a basket of 6 reference currencies) gained 0.21% in the evening to 96.18 points, while the euro fell 0.22% to $1.1370 under profit-taking. The dollar had started the session down but new words by Jerome Powell suggest that the Fed could lower its rates slower than expected.
In the bond markets, interest rates continued to decline after the speech from Powell. US benchmark 10-year T-Bond yield ended the day below 2% at 1.99% (-3 basis points), close to its lows since October 2016. In Europe, the 10-year German Bund ended Tuesday at -0.33% (-2 bps), approaching its historical low of June 18 to -0.35%.
In this turbulent environment, gold continued its “rally”, rising Tuesday to $1,425.50 per ounce (+0.52%) for the August futures contract on Comex, the highest in almost 6 years, in August 2013.
Oil prices have fluctuated between red and green, digesting the announcement of new US sanctions against Iran and its leaders. The July WTI futures contract ended the day down 0.12% to $57.83 on the Nymex, while the August Brent futures advanced 0.29% to $65.05 at the time of Nymex closing.
In the context of the standoff between Iran and the United States, the risk of military confrontation seems to be moving away, but Washington announced Monday a series of additional sanctions. These include the Iranian Supreme Leader, Ayatollah Ali Khamenei, and his office, and could last “years,” said Donald Trump. The United States will free billions of additional Iranian assets, said Treasury Secretary Steven Mnuchin.
On the macro-economic side, the statistics of the day showed some weaknesses in the US economy, already in the throes of a slowdown in activity for two months, both in the manufacturing sector and in services.
Thus, the index of American consumer confidence measured by the Conference Board has slipped in June, to 121.5, against 132 of consensus of place and 131.3 in May (reading revised downward.)
Moreover, the New home sales stood at 626,000 in May, the lowest in five months, while the consensus was expected to 680,000. The May figure has however been revised up slightly to 679,000 against 673,000 sales.