The dollar index (DXY00) fell from a 10.5-month high today and is down by -0.43%. The dollar retreated today after President Trump signaled he is willing to end the war in Iran. Also, today’s stock rally has curbed liquidity demand for the dollar. In addition, lower T-note yields today have weakened the dollar’s interest-rate differentials. Today’s US economic news was mixed for the dollar after Feb JOLTS job openings and the Mar MNI Chicago PMI fell more than expected, but the Mar consumer confidence index unexpectedly rose
The US Jan S&P CaseShiller composite-20 home price index rose +1.18% y/y, weaker than expectations of +1.38% y/y and the smallest pace of increase in 2.5 years.
The US Mar MNI Chicago PMI fell -4.9 to 52.8, weaker than expectations of 55.0.
The Conference Board US Mar consumer confidence index unexpectedly rose +0.8 to 91.8, stronger than expectations of a decline to 87.9.
US Feb JOLTS job openings fell -358,000 to 6.882 million, weaker than expectations of 6.890 million.
Swaps markets are discounting the odds at 3% for a +25 bp rate hike at the April 28-29 FOMC meeting.
The dollar continues to be undercut by a poor outlook for interest rate differentials, with the FOMC expected to cut interest rates by at least -25 bp in 2026, while the BOJ and ECB are expected to raise rates by at least +25 bp in 2026.
EUR/USD (^EURUSD) today is up by +0.51%. The euro is moving higher today amid dollar weakness. Also, today’s report showing Eurozone Mar CPI rose +2.5% y/y, the most in 14 months, is hawkish for ECB policy. In addition, hawkish comments today from ECB Governing Council member Madis Muller boosted the euro when he said the ECB can’t rule out an interest rate hike in April. On the negative side for the euro was today’s report that showed an unexpected decline in German Feb retail sales.
Eurozone Mar CPI rose +2.5% y/y, the most in 14 months but below expectations of +2.6% y/y. Mar core CPI rose +2.3% y/y, weaker than expectations of +2.4% y/y.
German Feb retail sales unexpectedly fell -0.6% m/m, weaker than expectations of a +0.3% m/m increase.
ECB Governing Council member Madis Muller said, “The ECB can’t rule out changes in interest rates already in April if energy prices remain at a high level for a long time.”
Swaps are discounting a 50% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) today is down by -0.38%. The yen is moving higher today amid a weaker dollar. The yen also garnered support today after the BOJ said it will cut its monthly bond purchases by 200 billion yen in Q2 from 2.705 trillion yen from 2.9 trillion yen. The yen also has carryover support from Monday when Japan’s top currency official said the government may take bold action in foreign exchange markets if the yen continues to weaken. The yen added to its gains today after T-note yields fell.
Limiting gains in the yen today was weaker than expected Japanese economic news on Feb industrial production and Feb retail sales. Also, today’s weaker than expected Mar Tokyo CPI report is dovish for BOJ policy and negative for the yen.
Japan Feb industrial production fell -2.1% m/m, weaker than expectations of -2.0% m/m and the biggest decline in 2 years.
Japan Feb retail sales fell -2.0% m/m, weaker than expectations of -1.0% m/m and the biggest decline in 5.75 years.
The Japan Feb jobless rate fell -0.1 to 2.6%, showing a stronger labor market then expectations of no change at 2.7%.
Japan Mar Tokyo CPI rose +1.4% y/y, weaker than expectations of +1.6% y/y and the slowest pace of increase in 4 years. Mar Tokyo CPI ex-fresh food and energy rose +2.3% y/y, right on expectations and the smallest pace of increase in a year.
The markets are discounting a +70% chance of a 25 bp BOJ rate hike at the next meeting on April 28.
April COMEX gold (GCJ26) today is up +80.60 (+1.78%), and May COMEX silver (SIK26) is up +3.411 (+4.83%).
Gold and silver prices are moving sharply higher today, with gold posting a 1-week high. Today’s weaker dollar and lower global bond yields are supportive of precious metals prices. Precious metals also rose today after President Trump signaled he is willing to end the war in Iran, which could put pressure on energy prices and ease inflation, allowing the Fed to cut interest rates, a bullish factor for precious metals. Gains in silver prices accelerated today after the China Mar manufacturing PMI expanded by the most in a year, a positive factor for industrial metals demand.
Today’s stock rally has curbed some safe-haven demand for precious metals. Also, hawkish comments today from ECB Governing Council member Muller were bearish for precious metals when he said the ECB can’t rule out an interest rate increase at next month’s policy meeting.
Precious metals have safe-haven support amid concerns about the escalation of the war in the Middle East. Saudi Arabia agreed to give the US military access to King Fahd Air Base, and the UAE closed an Iranian-owned hospital and club. Iran’s Middle Eastern neighbors are growing frustrated with Iran, which has responded to US and Israeli attacks by hitting targets in several nearby nations.
Precious metals continue to see strong safe-haven demand amid the ongoing war in Iran. Also, uncertainty over US tariffs, US political turmoil, large US deficits, and government policy uncertainty are boosting demand for precious metals as a store of value.
Recent fund liquidation of precious metals is bearish for prices, as long holdings in gold ETFs fell to a 3.5-month low on Monday after climbing to a 3.5-year high on February 27. Also, long holdings in silver ETFs fell to a 6.25-month low last Friday after rising to a 3.5-year high on December 23.
Strong central bank demand for gold is supportive of gold prices, following the recent news that bullion held in China’s PBOC reserves rose by +40,000 ounces to 74.19 million troy ounces in January, the fifteenth consecutive month the PBOC has boosted its gold reserves.
The China Mar manufacturing PMI rose +1.4 to 50.4, better than expectations of 50.1 and the strongest pace of expansion in a year.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
