U.S. Dollar Holds Gains as Crude Oil Reverses Earlier Losses

June US Dollar Index futures surged to its highest level since April 4, nearly retracing 50% of its March 28 top at 96.42 to its April 12 bottom at 93.62. The catalysts behind the rally were gains in global equity markets, improved data out of China and declines in the lower-yielding Euro and Japanese Yen.

The dollar did give back some of its gains after the release of reports showing softer-than-expected U.S. producer prices and retail sales numbers.

The dollar was also helped by expectations of a deal to stabilize oil output, and what seems like a bottoming out of expectations for U.S. interest rates. Although some traders believe that with the expectation for Fed rate hikes so incredibly low, it’s not going to take much to push them higher.

The EUR/USD fell 0.9 percent to 1.1278. It declined as low as 1.1274, a two-week low. In other news, industrial output in the Euro Zone fell a little more than expected in February, according to data from Eurostat. Output was down 0.8% versus expectations of a 0.7% drop. On the year, production was 0.8% higher, missing expectations of a 1.2% increase. Traders labeled the report downbeat, but not catastrophic.

The GBP/USD fell 0.0058 or -0.41% to 1.4215 ahead of Thursday’s Bank of England interest rate decision. The central bank is expected to leave interest rates and current stimulus levels unchanged. The Sterling continued to weaken one day after the International Monetary Fund said the U.K.’s exit from the European Union could cause “severe regional and global damage”.

The stronger dollar and rising equity prices also drove investors out of the June Gold futures contract which finished at $1250.20, down $10.70 or -0.85%. May Silver prices, however, defied weakness in the other precious metals to climb to a new 5 ½ month high. However, gains were limited by the psychological $16.00 level.

Investors cited the low gold/silver ratio as one reason for the interest in silver. The ratio, which measures the number of silver ounces needed to buy an ounce of gold, slid to a 3 ½ month low as silver outperformed gold. Holdings of the silver ETF tracked by Reuters have risen 946 tonnes since the start of the year.

June crude oil futures reversed earlier lows following mixed U.S. government data that showed a bigger-than-expected build in crude stockpiles, rising gasoline demand, and falling oil production. Traders pressured prices earlier in the session on concerns that a production freeze agreement would do little to trim the global supply glut.

The Energy Information Administration reported U.S. crude inventories increased by 6.6 million barrels, bringing the total in storage to 536.5 million barrels in the previous week. The report exceeded the American Petroleum Institute’s report that showed a build of 6.2 million barrels, an increase more than three times higher than analyst expectations.

Gasoline inventories fell by 4.2 million barrels the week-ending April 8, according to the EIA. Weekly crude production fell below 9 million barrels per day for the first time since late 2014.