The U.S. Dollar rose against a basket of major currencies on Wednesday. The catalysts behind the rally were a combination of end-of-the-month and end-of-the-quarter position-squaring, a stronger-than-expected US. Q4 GDP report, the easing of geopolitical tensions in Southeast Asia and hawkish comments from a high-ranking U.S. Federal Reserve official.
June U.S. Dollar Index futures settled at 89.765, up 0.782 or +0.88%.
The index was primarily driven by the dollar’s 1.45% gain against the Japanese Yen. The rally was fueled by flows related to quarter-end, and for many Japanese firms, the financial year end, on March 31. Some traders said the quarter-end, and financial-year end flows are somehow larger this year than usual.
The heavily-weighted Euro also fell against the dollar as soft Euro Zone economic data combined with dovish comments from some European Central Bank officials suggested the ECB is in no hurry to wind back its stimulus given the specter of low inflation.
U.S. GDP came in at 2.9%, up from the previously reported 2.5% and better than the 2.7% estimate. Pending Home Sales rose 3.1%, beating the 2.1% estimate and a marked improvement from the previously reported 5.0% decline.
The Fed’s Raphael Bostic said on Wednesday that the central bank should continue to raise interest rates back to the long-term neutral rate given how close the central bank is to its goals.
Gold
A massive rally in the U.S. Dollar sent gold investors scrambling for the exits on Wednesday, driving the market to a one-week low while posting its biggest one-day decline in nearly nine months.
June Comex Gold futures settled at $1329.10, down $18.80 or -1.39%.
Despite the volatility in the stock market and the drop in U.S. Treasury yields, gold’s appeal as a safe haven asset dropped on Wednesday. Concerns about the global trade war also eased after the Trump Administration said the President’s tariffs on Chinese goods may not be imposed until early June.
Additionally, the lack of interest in gold was driven by hopes of détente in East Asia. According to reports, North Korea’s leader Kim Jong Un pledged his commitment to denuclearization and to meet U.S. officials, China said on Wednesday after his meeting with President Xi Jinping, who promised China would uphold friendship with its isolated neighbor.
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Crude Oil
U.S. West Texas Intermediate and international-benchmark Brent Crude Oil settled lower on Wednesday after a U.S. government report showed a jump in crude inventories. At the same time, geopolitical tensions eased and the dollar rose, making dollar-denominated crude oil a less-desirable asset.
May WTI crude oil settled at $64.67, down $0.58 or -0.89% and June Brent crude oil finished the session at $69.06, down $0.40 or -0.58%.