Dollar capitalizes on rising US yields ahead of mid-level data

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Here’s what you need to know on Tuesday, June 7:

As the yield on benchmark 10-year US Treasury bonds rose above 3% on Monday, the greenback strengthened against its rivals earlier in the week. The US dollar index extended its rebound early on Tuesday and hit its highest level in two weeks. The Eurozone Sentix Investor Confidence report will be scrutinized for further momentum in the first half of the day. Later in the session, April’s data on the goods trade balance and the evolution of consumer credit will be presented in the US economic file.

US stock index futures are down 0.5% to 0.8% at the start of the European session, indicating a risk-averse market atmosphere.

During Asian trading hours on Tuesday, the Reserve Bank of Australia (RBA) announced that it had raised its benchmark rate by 50 basis points to 0.85% following its policy meeting. Commenting on the policy decision, RBA Governor Phillip Lowe noted that inflation in Australia had risen significantly. “The board expects to take further steps in the process of normalizing monetary conditions in Australia over the coming months,” Lowe added.

Although AUD/USD hit a daily high of 0.7243 with the initial reaction to the RBA’s bigger than expected rate hike, it erased much of its daily gains and returned to the 0.7200 zone in the European morning .

GBP/USD managed to close in positive territory on Monday but came under further downside pressure on Tuesday. The pair was last seen at its lowest level since May 19 below 1.2500. British Prime Minister Boris Johnson survived Monday’s vote of no confidence but 148 MPs voted against him.

EUR/USD fluctuates in a narrow band below 1.0700 on Tuesday after posting small losses on Monday. Data released by German Destatis revealed that factory orders contracted 2.7% on a monthly basis in April, largely missing market expectations for a 0.5% increase.

Under pressure from rising US Treasury yields, gold fell slightly earlier in the week and closed below $1,840. XAU/USD recorded a modest rebound on Tuesday but continued to trade below $1,850.

Bank of Japan Governor Haruhiko Kuroda reiterated earlier in the day that a weak Japanese yen would be good for the economy if exchange rate swings weren’t too steep. USD/JPY extended its rally and hit a 20+ year high above 132.70.

Following Monday’s recovery, Bitcoin turned south on Tuesday and was last seen losing nearly 6% on the day at $29,500. Ethereum lost momentum before testing $2,000 and fell below $1,800 early on Tuesday.

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