High inflation in the US and further increases in producer prices are increasing the pressure on the US Federal Reserve to tighten interest rates. That strengthens the dollar, the euro goes down.
The prospect of even more significant rate hikes in the US than previously expected has pushed the dollar higher and, in turn, pushed the euro well below the one dollar mark. The common currency temporarily fell by a good one US cent to $ 0.9953. Because of the unexpectedly sharp rise in US inflation in June, the US Federal Reserve could raise the key interest rate by up to a full percentage point. In the past few days, numerous US central bankers had signaled their approval of a further increase of 0.75 percentage points. The surprising rise in producer prices in the USA also points to persistently high inflation in the country.
Dollar strength pushed gold prices lower because it makes the precious metal less attractive as an investment for non-dollar investors. A troy ounce of gold has meanwhile fallen by 2.2 percent to $1,697. In the case of copper and crude oil, the looming recession as a result of drastic interest rate increases was an additional burden. The price of the base metal fell 3.5 percent to $7,050 a ton. A barrel of Brent oil cost $97, down 2.5 percent from the previous day.
Investors also looked to Italy with a worried expression. There the government of Prime Minister Mario Draghi threatens to fall because the co-governing Five Star Movement wants to stay away from a vote of confidence. This caused the 10-year Italian government bonds to experience their biggest drop in prices in three months. In return, the return rose from 3.23 to 3.55 percent.
Many investors are counting on an approaching end to the negative interest rates in the euro zone. This is shown by the corresponding Euribor reference interest rate, which was just slightly positive again for the first time since 2015. Euribor is the interest rate at which banks lend money to each other in the short term.