The dollar index (DXY00) today is up by +0.19%. The dollar is climbing today as doubts about whether a ceasefire in Iran will materialize weigh on stocks and boost safe-haven demand for the dollar. Also, today’s decline in US weekly continuing unemployment claims to a 1.75-year low is a sign of a strong labor market that is hawkish on Fed policy and dollar-supportive. In addition, today’s +3% surge in crude oil prices pushed inflation expectations higher and may prompt the Fed to keep monetary policy restrictive, a bullish factor for the dollar.
The dollar found support today after Axios reported the Pentagon is developing military options for a “final blow” in Iran that could include the use of ground forces and a massive bombing campaign if there is no progress in diplomatic talks and the Strait of Hormuz remains closed when President Trump’s deadline ends this weekend.
US weekly initial unemployment claims rose by +5,000 to 210,000, right on expectations. Weekly continuing claims fell -32,000 to a 1.75-year low of 1.819 million, showing a stronger labor market than expectations of 1.849 million.
Swaps markets are discounting the odds at 4% 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 down by -0.16%. The euro is under pressure today from a stronger dollar. Also, today’s report showing German Apr GfK consumer confidence index fell more than expected to a 2-year low is bearish for the euro. In addition, the euro is under pressure from today’s +3% jump in crude oil prices, which may weigh on the Eurozone economy that imports most of its energy needs.
Eurozone Feb M3 money supply rose +3.0% y/y, weaker than expectations of +3.2% y/y.
The German Apr GfK consumer confidence index fell -3.2 to a 2-year low of -28.0, weaker than expectations of -27.3.
Swaps are discounting a 65% chance of a +25 bp rate hike by the ECB at the April 30 policy meeting.
USD/JPY (^USDJPY) today is up by +0.07%. The yen is moving lower today due to a stronger dollar. The yen is also under pressure today from a +3% jump in crude oil prices, which is negative for Japan’s economy, which imports most of its energy needs. In addition, higher T-note yields today are bearish for the yen. Losses in the yen are limited after Japan’s Feb PPI services prices rose more than expected, a hawkish factor for BOJ policy.
Japan Feb PPI services prices rose +2.7% y/y, stronger than expectations of +2.6% y/y.
The markets are discounting a +66% chance of a 25 bp BOJ rate hike at the next meeting on April 28.
April COMEX gold (GCJ26) today is down -113.10 (-2.48%), and May COMEX silver (SIK26) is down -3.721 (-5.13%).
Gold and silver prices are sharply lower today amid a stronger dollar and higher global bond yields. Also, today’s +3% jump in crude oil prices raises inflation expectations that may keep the world’s central banks pursuing restrictive policies, a bearish factor for precious metals. In addition, today’s action by the OECD to raise its global inflation forecast for this year due to the war in Iran could prompt central banks to tighten policy, a negative factor for precious metals.
Precious metals also have safe-haven support amid concerns about the escalation of the war in the Middle East. Axios reported today that the Pentagon is developing military options for a “final blow” in Iran that could include the use of ground forces and a massive bombing campaign if there is no progress in diplomatic talks with Iran. Also, 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 war in Iran, which has entered its 25th day. 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 3.25-month low on Tuesday 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 Organization for Economic Cooperation and Development (OECD) raised its G-20 inflation forecast for 2026 to 4.0% from a December estimate of 2.8%, due to the war in Iran.
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
