Dollar Advances, Equities Slide as Sentiment Worsens

Rate hike expectations have been steadily increasing since late May, boosting USDJPY and sending gold lower. US yields returned to near their cycle highs, with the 10-year yield jumping above the 3% threshold.

At the same time, the USDJPY pair advanced to new cycle highs above 132.50, the level last seen more than two decades ago, 

Earlier today, the Reserve Bank of Australia raised its cash rate by 50 basis points to 0.85%, a more significant tightening than many investors had expected, resulting in a slight gain in the Australian dollar. However, since the overall sentiment in the markets remained negative, the Australian dollar failed to hold initial gains and turned negative during the London session.

In Europe, German factory orders fell in April, indicating that Europe's economic powerhouse's manufacturing crisis intensified.

According to the latest statistics released by the Federal Statistics Office on Tuesday, factory orders fell 2.7% month over month, compared to 0.5% projected and -4.2 percent the previous month. On a yearly basis, orders fell 6.2% compared to -3.1% the prior month. EURUSD traded slightly lower after the data.
 

UK politics undermine sterling

Prime Minister Boris Johnson "survived" the confidence vote in the UK. The decision kept the PM in power, but the poll demonstrated that he had little support from inside his own party, which hangs over his head like a dangling threat. Johnson received 211 votes in the House of Commons, but 41% of his party voted to remove him. 

It was the harshest assessment of a sitting prime leader by their party in recent memory. As a result, the GBPUSD pair fell to the lowest level since late May, breaking below 1.25 again.