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The U.S. dollar traded lower against the most major currencies, but the U.S. currency is still supported by higher U.S. Treasury yields. The yield on the U.S. 10-year Treasuries climbed to 2.64% on Tuesday. That was the highest yield since last month.
The euro traded mixed against the U.S. dollar. The euro suffers due to bond yield gap between some euro area government bonds and U.S. Treasuries. While the currency in the Eurozone is to remain permanently cheap, the first interest rate hike by the Fed in the United States and by the Bank of England in the U.K. is more likely.
The European Central Bank cut its interest rate last Thursday. The ECB reduced its deposit rate to -0.10% from 0.0%. The European Central Bank is the world’s first major central bank to use a negative rate. The deposit rate of -0.10% means that commercial bank will be charged for holding their reserves. This measure should spur commercial banks to ramp up lending.
The British pound increased against the U.S. dollar due to the strong labour market data in the U.K. The U.K. unemployment rate fell to 6.6% in the three months to April from 6.8% in the previous three months. That was the lowest level since early 2009. Analysts had expected a decline to 6.7%.
Jobless claims (claimant count) declined by 27,400 in May, compared with a forecast for a decline of 25,000 people. April’s figure was revised to a decrease of 28,400 from 25,100.
Weekly earnings increased by 0.7% in the three months to April, missing expectations for a 1.2% gain, after a 1.7% rise in the previous three months. The growth of wages is slower than inflation in the U.K. The inflation rate in the UK was 1.8% in April.
The Japanese yen rose against the U.S. dollar due to expectations that the Bank of Japan will not expand its stimulus measures at its meeting this week.
The Canadian dollar rose against the U.S. dollar in the absence of any economic data.
In the overnight trading session, the BSI manufacturing index was released in Japan. . Japan's BSI manufacturing index for the second quarter declined to 13.9 points from 12.7 in the first quarter, missing expectations for a rise to 14.1.
The New Zealand dollar rose against the U.S dollar in the absence of any major economic reports. The kiwi was supported by expectations the Reserve Bank of New Zealand (RBNZ) will raise interest rates again later in the day. Investors expect the RBNZ will hike its interest rate by 0.25% to 3.25%.
The Australian dollar climbed to 1-month highs
against the U.S. dollar due to the better-than-expected consumer sentiment data
from Australia. The Westpac consumer confidence in Australia increased 0.2% in
June, after a 6.8% decline in May.
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