Dollar Index Supported by Rising Rates, Capped by Firm Euro

U.S. Dollar Index futures are trading slightly lower on Friday, while continuing to hover around a five-month high hit earlier in the week. The Greenback was buoyed by a rise in U.S. Treasury yields that indicates the economy is heating up, raising expectations for further rate hikes later this year.

At 0720 GMT, June U.S. Dollar Index futures are trading 93.350, down 0.025 or -0.03%.

Early Friday, U.S. benchmark 10-year yields are trading near a high of 3.128 percent in the Asian market, its highest level in nearly seven years.

The Dollar/Yen is creeping higher early Friday, hitting a fresh four-month high with the price action driven by the widening spread between U.S. Treasury Bond yields and Japanese Government Bond yields.

At 0720 GMT, the USD/JPY is trading 110.837, up 0.061 or +0.05%.

The dollar’s gains are being limited by a firmer Euro, which is coming off a five-month low hit on Wednesday. The single-currency was pressured this week by concerns about the demands of populist parties likely to form Italy’s next government.

At 730 GMT, the EUR/USD is at 1.1815, up 0.0018 or +0.16%.

Earlier in the week, the Euro was pressured by a draft coalition document showing plans to ask the European Central Bank to forgive 250 billion Euros in debt, and create procedures to allow countries to exit the Euro.

The EUR/USD is trading higher early Friday as investors downplayed the broader impact on Euro Zone political stability and questioned whether the Italian parties would really follow through on such plans.

Gold

Gold futures are trading flat early Friday, supported by the weaker U.S. Dollar, but pressured by the rise in U.S. Treasury yields. Renewed geopolitical tensions over North Korea may be encouraging some buying. Additionally, there are also worries over an escalation of tensions between the United States and China over trade issues.

At 0745 GMT, June Comex Gold futures are trading $1288.90, down $0.50 or -0.05%.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading firm early Friday in limited action. The market is being supported by strong demand, ongoing production cuts from the OPEC-led deal to stabilize prices and looming U.S. sanctions against major crude exporter Iran which could lead to supply disruptions. Gains are being limited by worries over increasing U.S. production.

At 0755 GMT, July WTI crude oil is trading $71.70, up $0.13 or +0.18% and July Brent crude oil is at $79.55, up $0.25 or +0.32%.