Rangebound U.S. Dollar Finishes Higher Against Basket of Currencies

The U.S. Dollar was mostly rangebound against a basket of currencies on Monday as investors prepared for the widely anticipated summit between U.S. President Donald Trump and North Korea President Kim Jong-un.

Against individual currencies, the dollar lost ground to the Euro and the Australia Dollar, buy was able to offset those losses with gains versus the Japanese Yen, British Pound and New Zealand and Canadian Dollars.

The dollar performed surprisingly well in the wake of heightened worries over a global trade war following a disagreement at the G-7 conference in Canada over the week-end.

The EUR/USD was underpinned after assurances from Italy that it would not leave the European Union calmed investors’ nerves. Gains were limited, however, by general uncertainty ahead of Thursday’s European Central Bank’s interest rate decision and monetary policy statement. The ECB is also expected to announce the timetable for its exit from quantitative easing.

Overall, the U.S. Dollar was supported by expectations of a 25 basis point rate hike by the Fed on Wednesday. Traders are also preparing for Tuesday’s consumer inflation report.

The USD/JPY rose in reaction to increased demand for higher risk assets and a rise in U.S. Treasury yields. The divergence between the hawkish Federal Reserve and the dovish Bank of Japan helped make the U.S. Dollar a more attractive investment.

U.S. Stock Market

The major U.S. stock indexes finished higher on Monday as investors shrugged off the events at last week-end’s G-7 meeting, instead choosing to focus on the meeting between President Trump and North Korean leader Kim Jong-un. Volume was low and some of the trading was related to position-squaring ahead of Tuesday’s U.S. consumer inflation report and Wednesday’s Federal Reserve announcements.

U.S. Treasury Markets

U.S. Treasury yields rose on Monday as investors moved past the events at the G-7 meeting and on to the CPI data scheduled for Tuesday and Wednesday’s Fed announcements. The U.S. central bank is expected to announce a quarter-point increase in interest rates, but the focus for investors will be on the central bank’s economic projections which could offer clues as to the number of rate hikes to expect later this year.

Gold

Gold prices firmed on Monday despite the stronger U.S. Dollar, higher interest rates and increased demand for risky assets. The move was likely driven by short-covering ahead of the United States-North Korea summit scheduled for June 12 and the start of the Fed’s two-day meeting.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil rebounded from early losses on Monday, as bullish comments from the Iraqi oil minister raised doubts as to whether OPEC would decide to boost output at its upcoming meeting.