Dollar Plummets on Data, Gold Rises

U.S. 10-year Treasury bond prices fell
fractionally today, after an inflation report was released that showed consumer
prices rose less than forecast in April. Despite a weak inflationary report,
which would have normally driven prices higher, bonds fell slightly to close the
day lower. The dollar reacted violently to the information, but bonds seemed to
shrug the negative data off. Bonds typically move lower on positive economic
news and higher on negative news, so technically, traders took today’s report as
a positive for the overall picture.

The euro rocketed higher against the dollar,
and moved to within a fraction of record highs against the yen today. The euro
has been characterized by strength and dominance over the U.S. dollar and the
yen lately, trading near record highs both the yen and the dollar. Europe has
been dominating the global market in economic growth and inflationary
pressures. Despite holding rates during the last meeting, the ECB hinted that
more hikes are coming soon, promising continued “vigilance.” A soft
inflationary report from the U.S. led to dollar selling across the board. A
CPI report showed that consumer prices rose 0.4% in April, versus expectations
of a 0.5% gain. The soft report led traders to bet that the Fed would be
forced to cut rates to deal with slowing growth, leading to dollar selling.

Crude oil futures rose about 0.75% to close
near $63 a barrel today, after Shell cut its Nigerian crude output, after a
“community dispute” in the country. Nigeria has been a source of worry lately
for crude traders, with recurring terrorist attacks, political corruption and
overall instability. Crude oil trades very sensitively to world events,
especially those which occur in or involve oil-producing nations. Natural gas
futures fell just over 1% on speculation that current reserves will be able to
handle summer demands.

Gold futures rose about 0.5% today, on dollar
weakness. Gold usually trades inversely to the dollar and with oil; today,
dollar action dominated gold trading, as traders bought the metal and sold the
dollar. Copper futures rose just over 1% on China demand worries.

Grains rose across the board. Soybeans gained
1%, wheat rose about 1.2% and corn jumped 2%.


U.S. consumer
prices rose 0.4% in April, versus expectations of 0.5%.

John Lee

Associate Editor