EUR/USD Firms on Report ECB Could Announce Timetable to End Quantitative Easing Program

The U.S. Dollar settled mixed on Tuesday against individual currencies, but lower against the total basket of currencies as investors sorted through a cluster of domestic reports, and increasing concerns that the United States could pull out of its trade agreement with Canada and Mexico.

June U.S. Dollar Index futures settled the session at 93.871, down 0.115 or -0.12%.

Forex

The currency that had the largest impact on the U.S. Dollar Index was the Euro. It was bolstered on Tuesday after Bloomberg, citing sources, reported that the European Central Bank could conclude its next policy meeting this month with a public announcement on when its quantitative easing program would end.

Traders believe the ECB will make a pre-emptive strike by making the early announcement ahead of the June 14 meeting to calm investors previously rattled by the political turmoil in Italy.

Investors reacting positively to the Bloomberg story, settling the EUR/USD at 1.1717, up 0.0023 or +0.20%.

Also helping to underpin the Euro was a speech by Italy’s new Prime Minister Giuseppe Conte, which reassured investors that leaving the single-currency was not on his agenda. However, investor confidence in Italy was rattled somewhat by Conte’s announcement of new government tax cuts and higher welfare. This news sent Italian bond yields higher.

The Canadian Dollar and Mexican Peso fell sharply on Tuesday against the U.S. Dollar after White House economic adviser Larry Kudlow said that President Donald Trump is considering holding separate talks with Canada and Mexico. This raised concerns that the Trump Administration may be leaning towards scraping the entire North American Free Trade Agreement (NAFTA).

Gold

A drop in U.S. Treasury yields due to trade issue concerns over the possible scrapping of the NAFTA helped boost gold futures on Tuesday. Geopolitical concerns also led to flight to safety buying into U.S. Treasuries which drove yields lower. Traders were reacting to a speech by Italy’s new Prime Minister Giuseppe Conte, who vowed to enact economic policies that could balloon the nation’s already-heavy debt load.

Crude Oil

After hitting a two-month low earlier in the session, U.S. West Texas Intermediate and international-benchmark Brent crude oil reversed course to close higher on Tuesday.

Prices were under pressure early due to concerns over rising U.S. production and fear of an increase in OPEC-led output. However, short-sellers and profit-takers covered positions aggressively late in the day after the American Petroleum Institute reported a larger-than-expected drawdown in U.S. crude inventories.