The dollar index (DXY00) on Wednesday fell by -0.59%.  The dollar on Wednesday posted moderate losses. Lower T-note yields Wednesday undercut the dollar.  Also, the lack of clarity regarding the U.S. debt ceiling weighs on the dollar after Treasury Secretary Yellen said the Treasury Department might run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised.  The dollar maintained moderate losses Wednesday despite the Fed raising interest rates by 25 bp.

Wednesday’s better-than-expected U.S. economic news was bullish for the dollar.  The Apr ADP employment change rose +296,000, stronger than expectations of +150,000 and the biggest increase in 9 months.  Also, the Apr ISM services index rose +0.7 to 51.9, stronger than expectations of 51.8.

Despite the FOMC raising the fed funds target range by +25 bp to 5.00% to 5.25% as expected, the post-meeting statement was dovish Fed policy and bearish for the dollar.  The FOMC omitted prior language that signaled more rate hikes ahead and instead said it would take into account various factors "in determining the extent to which additional policy firming may be appropriate."

Comments Wednesday from Fed Chair Powell were bullish for the dollar.  He said banking conditions have "broadly improved" since March. He also said his forecast is for modest growth, not a recession, although it’s possible we’ll have what would be a mild recession.  He added that the FOMC views inflation as coming down "not so quickly." And "in that world," it "would not be appropriate" to cut rates, and the Fed would not cut rates. "That's not our forecast."

EUR/USD (^EURUSD) on Wednesday rose by +0.45%.  Dollar weakness on Wednesday boosted the euro.  Also, signs of economic strength in the Eurozone were bullish for the euro after Wednesday’s news showed the Eurozone Mar unemployment rate unexpectedly fell to a record low.

The Eurozone Mar unemployment rate unexpectedly fell -0.1 to a record low of 6.5%, showing a stronger labor market than expectations of no change at 6.6%.

USD/JPY (^USDJPY) on Wednesday fell by -0.67%.  The yen Wednesday posted moderate gains on a decline in T-note yields.  Also, the ongoing banking turmoil in the U.S. is fueling safe-haven demand for the yen. In addition, the sell-off in crude prices Wednesday to a 5-week low is supportive of Japan’s energy-dependent economy and the yen.   

June gold (GCM3) on Wednesday closed up +13.70 (+0.68%), and July silver (SIN23) closed up +0.062 (+0.24%).  Precious metals Wednesday closed moderately higher, with gold posting a 2-1/2 week high.  A weaker dollar Wednesday was supportive of metals prices.  Also, Wednesday’s decline in global bond yields today is bullish for metals.  In addition, precious metals have safe-haven support on concerns about the health of the U.S. banking system and as the U.S. government gets nearer to default without an extension of the debt ceiling. 

• Stocks Mixed Ahead of an Expected +25 bp Fed Rate Hike
• Dollar Retreats on Signs of U.S. Economic Weakness
• Bank Jitters and Debt Ceiling Weigh on Stocks
• Better-Than-Expected U.S. Economic Reports Boost the Dollar