LP:US Dollar Index soars higher over 84 pushing down commodity prices
The US Dollar Index is finding new strength and hit the 84 mark this morning which is the highest it has been for over nine months, whilst commodity prices including crude oil and gold dipped and stock markets remained flat.
Latest US Dollar Index Rate
As of 08:18 GMT this morning the US Dollar Index, which tracks the greenback against six other major world currencies was at 84.010 on the ICE Futures Exchange. On the commodity side of things, gold futures ended yesterday’s trading session down 2 percent at $1,396.20 an ounce, the lowest settlement since April 19. Meanwhile, silver prices closed at their lowest in over 2½ years, falling 3.1% to $22.658 an ounce.
Brent oil was down to $103.26 and WTI crude was at $93.75 respectively.
Euro Zone Slump and the Dollar
One reason for the renewed strength in the Dollar Index would be grim news out of the euro zone. The European debt crisis has mutated into Europe’s longest slump of the postwar era, with no recovery in sight. The euro zone’s output of goods and services, or gross domestic product, fell in the first three months of the year at an annualized rate of 0.9 percent, data out Wednesday showed. In contrast, US GDP grew at a 2.5 percent pace in the first quarter of 2013.
“Dollar bulls will be watching for the Empire Manufacturing data and anything that provides a clue as to where the US economy will be going. Expectations are firming for US employment to move to the 6.5 percent level and signal the end of QE. Funds are moving away from the euro given further evidence of a major slowdown.” said Neil Jones, the head of hedge-fund sales at Bank Ltd, London.
“The ECB’s recurrent predictions of an imminent recovery are the triumph of hope over wisdom,” said Willem Buiter, chief economist at Citigroup. “Euro zone countries will face a mix of recession and tepid recovery for “two or three more years,” he said.
Some investors expect that breaking 84 for the Dollar Index now paves the way for moves higher with some predictions citing 88 a realistic target. If these predictions materialise then expect commodity prices to fall further.
