The U.S. dollar is continuing its rally, given a lift on Friday when Fed Chair Janet Yellen told reporters that zero interest rates would end this year. The greenback has hit a one-month high against the euro, as the common currency drops below 1.10 on Greek default fears, and blasted over 123 yen, to hit an eight-year high against the Japanese currency.
This big upward move in the dollar is depressing commodities, which are denominated in dollars in international trade. Crude oil is down this morning around 1.5%, as is gold.
Yesterday in the Markets
Monday was a Federal holiday in the U.S., with the markets closed.
Factors Affecting Gold Today
The #1 factor affecting gold today is the continued surge in the U.S. dollar. The news that the leftist government in Greece has admitted it will run out of money before the next IMF payment is due, has pummeled the euro. The resulting surge in the dollar sent gold below the $1200 mark. A second drop came at the New York open, sending gold under $1190.
Greece’s Interior Minister told reporters “The four installments for the IMF in June are €1.6bn, this money will not be given and is not there to be given.” The Greek government, dominated by socialists and communists, continues to reject the terms of the bailout agreed to by previous administrations, even as the economy collapses and fearful Greek citizens pull billions of euros out of Greek banks.
This second drop was abetted by durable goods orders for April being announced. Although the overall numbers showed a 0.5% drop compared to a 5.1% gain in March, it wasn’t much worse than expected. Traders, however, looked past the headline number to manufactured goods, which does not include transportation. That came in as expected, up 0.5%. These numbers are coming at the expense of bursting-full warehouses, as inventories set yet another all-time record, rising .2%.
The press may be underreporting inflation pressures, at least when you take the data presented in this Wall St. Journal economic review. Not only is inflation heating up, so are rental costs and home prices. As fewer workers are able to afford the basics of living, demand for wage increases will only… increase.
Wednesday will be light on economic reports, with the two most important being consumer sentiment in Germany, and mortgage applications in the U.S.