The US dollar declined modestly on Tuesday, as oil prices rebounded from six-month lows and gold rallied above $1,190.00 an ounce, setting the stage for an active second half of the week headlined by US employment data.
The US dollar index, a weighted average of the dollar against six global currencies, dipped 0.1% to 97.38. However, most of the losses were concentrated against the Canadian dollar, with the USD/CAD exchange rate tumbling 0.4% to 1.3112
In other trading, the dollar advanced slightly against the euro, with the EUR/USD climbing 0.2% to 1.0971. The greenback also advanced against the British pound, with cable rising 0.2% to 1.5614.
In economic data, US factory orders advanced 1.8% in June, as expected, buoyed by strong demand for transportation equipment. Orders for transportation equipment soared 9.3% in June on strong demand for aircraft, the Department of Commerce reported. Non-defense capital goods excluding aircraft – a key gauge of business spending – rose 0.7%, official data showed.
On Monday the Institute for Supply Management reported a slowdown in US manufacturing activity in July, as a strong dollar weighed on exports. ISM’s July manufacturing PMI slipped to 52.7 from 53.5. Economists had forecast no change from the previous month.
In commodities, oil prices rebounded sharply on Tuesday after plunging to six-month lows at the start of the week. Brent crude, the international benchmark, advanced 56 cents or 1.1% to $50.08 a barrel on the ICE Futures Exchange in London. The international benchmark fell below $50 a barrel on Monday for the first time since January.
US crude futures rose 71 cents or 1.6% to $45.88 a barrel on the New York Mercantile Exchange. The WTI contract was under pressure at the start of the week as investors reacted to data from Baker Hughes showing the number of active US rigs increased for a second consecutive week last week, heightening concerns about the global supply glut.
According to analysts, the global energy markets produce around 91 million barrels of oil per day, but demand is somewhere around 89 million barrels per day. Peak OPEC production, the US shale boom and the lifting of Iranian sanctions are expected to keep the globe well supplied for the foreseeable future.
Gold prices, which usually trade inversely with the US dollar, also advanced on Tuesday. Gold for December delivery, the most actively traded contract, rose $1.80 to $1,091.20 US per troy ounce. The contract had reached a daily high of $1,094.40 an ounce.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.