Euro Rebound Fuels Plunge in U.S. Dollar Index

The U.S. Dollar posted a two-sided trade on Monday, first drifting higher early in the session then plunging into the close. Most of the selling pressure was attributed to the strength in the Euro. The single-currency rebounded from the day’s lows, but continued to remain well below its 2-1/2 year high reached earlier this month. September U.S. Dollar Index futures also remained slightly above its multi-month low despite the strong selling pressure.

With very little major economic news, investors were forced to speculate on the outcome of President Trump’s speech Monday night, the commencement of military exercises between South Korea and the U.S., and the start of the annual central banking conference in Jackson Hole, Wyoming later this week. Traders are hoping central bankers signal their next policy actions at this year’s symposium.

Although recent economic data and the Fed minutes have reduced the chances of a Fed rate hike later this week, expectations may rise if Fed Chair Janet Yellen emphasizes that the risks to inflation objectives and financial stability require careful monitoring in her speech on Friday.

European Central Bank President Mario Draghi is not expected to deliver a new policy message at the Jackson Hole conference.

Gold

Gold futures rallied on Monday as investors reacted to renewed tensions over North Korea. The market was also supported by doubts about U.S. President Trump’s ability to enact pro-business policies.

Investors flocked into the safe-haven gold market as they braced for North Korea’s response to computer-simulated military exercises begun by South Korean and U.S. forces on Monday that will continue into the end of the month.

The market remained underpinned by last week’s activity in Washington. Gold has become a more attractive asset since it looks as if Trump will not be able to push forward with his plan for tax reform and increased infrastructure spending.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures fell sharply on Monday, losing a little over 1 percent. Profit-taking was being blamed for the sell-off as investors took advantage of an unexpected two-day surge in prices amid talk the market was starting to rebalance.

In other news, Iraq informed its customers that it plans to switch its price benchmark for Basra crude in Asia to DME Oman futures from January, dropping the average of Platts’ Oman-Dubai quotes, in a major shift in the way it prices its oil.