U.S. Dollar Soars after Upbeat Data Drives Treasury Yields Higher

September U.S. Dollar Index futures surged on Monday after upbeat U.S. economic data sent Treasury yields to seven-week highs. The dollar rose against a basket of currencies after the release of a stronger than expected Institute of Supply Management (ISM) report for June sent the 10-year U.S. Treasury yield sharply higher.

The strong rally helped the dollar index rebound from a nine-month low on Friday. The Greenback plunged last week as expectations increased that central banks in Europe, the U.K. and Canada would eventually shift to tighter monetary policy.

Traders noted that the rise in the dollar came about from direct demand for the Greenback and not weakness in the other currencies. This is because it may have fallen too far, too fast at a time when the Federal Reserve was strongly considering hiking interest rates later in the year.

Economic Reports

The IHS Markit U.S. Manufacturing PMI Index for June, slipped to 52.0 from 52.7 in May. The ISM Manufacturing Index for June rose to 57.8 from 54.9.

Construction Spending was flat at 0.0% versus a 0.3% estimate. Total Vehicle Sales came out in line with expectations of 16.5 million.

U.S. Stock Market

The major U.S. stock indexes closed mixed on Monday. The Dow Jones Industrial Average reached a record high before settling about 130 points higher. It was supported by a rise in Goldman Sachs and the financial services sector.

The benchmark S&P 500 Index was boosted by the financial services sector and the energy sector. Rising interest rates should help increase the profitability of banks, making them an attractive assets. Crude oil rallied for an eighth straight day, helping to boost oil stocks and the energy sector.

Technology stocks weakened, pressuring the NASDAQ Composite. This also signaled a continuing shift out of technology stocks and into financial sector stocks.

Gold

August Comex Gold futures plunged to a seven-week low on Monday, posting its biggest one-day loss in two-months. The market was pressured by a stronger U.S. Dollar and the rising interest rate environment that began last week when several central bankers joined the Fed in making hawkish remarks about the future of rate hikes.

Crude Oil

August West Texas Intermediate crude oil rallied for an eighth day as investors began to price in the possibility of smaller U.S. production. The eight day rally marked the longest winning streak for crude oil since February 2012.

Traders said that last week’s 100,000 barrel per day drop in U.S. production was partially responsible for the rally along with the first decline in the rig count since January.