The dollar index (DXY00) fell by -0.03% on Tuesday. This decline was primarily driven by increasing optimism for a deal to reopen the Strait of Hormuz. This prospect positively impacted stock markets and led to a sharp decrease in crude oil prices. The slide in crude oil, which tumbled over -5% to a three-week low, is expected to lower inflation, potentially encouraging the Federal Reserve to ease monetary policy, a factor that is generally negative for the dollar.
Further pressure on the dollar came from weaker-than-expected US economic data. June JOLTS job openings fell by 178,000 to 7.359 million, missing expectations of 7.454 million and indicating a softening labor market. Additionally, June factory orders unexpectedly declined by -0.4% month-over-month. The US June trade deficit also came in slightly wider than anticipated at -$73.3 billion, against expectations of -$73.0 billion.
In contrast, the Euro (EUR/USD) rose by +0.19% on Tuesday, benefiting from the dollar's weakness and the decline in crude oil prices, which is favorable for the Eurozone economy given its reliance on energy imports. Gold and silver prices also saw sharp increases, with silver reaching a one-week high, as slumping crude oil prices and lower Treasury note yields supported precious metals. The markets are currently pricing in a 58% probability of a +25 basis point rate hike at the next FOMC meeting on September 15-16.
