The dollar index (DXY00) today is up by +0.17%. The dollar today recovered from early losses and turned higher after T-note yields rebounded from losses and moved higher, strengthening the dollar’s interest rate differentials. Also, a rebound in stocks today from sharp losses has curbed liquidity demand for the dollar.
The dollar today initially moved lower because of concerns that the escalating global trade war would derail the economy and force the Fed to cut interest rates. The dollar is also facing a confidence crisis as the US renegotiates its relationships with its trading partners, diminishing the dollar’s reserve-currency status and prompting some foreign investors to liquidate their dollar assets.
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The markets are discounting the chances at 42% for a -25 bp rate cut after the May 6-7 FOMC meeting.
EUR/USD (^EURUSD) today is down by -0.16%. The euro today gave up an early advance and turned lower as a rebound in the dollar sparked long liquidation in the euro. Also, weaker-than-expected Eurozone economic news today is weighing on the euro after Eurozone retail sales rose less than expected and the Eurozone Apr Sentix investor confidence index fell more than expected to a 1-1/2 year low.
Eurozone Feb retail sales rose +0.3% m/m, weaker than expectations of +0.5% m/m.
The Eurozone Apr Sentix investor confidence index fell -16.6 to a 1-1/2 year low of -19.5, weaker than expectations of -9.0.
German Feb industrial production fell -1.3% m/m, weaker than expectations of -1.0% m/m.
Swaps are discounting the chances at 88% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is up by +0.15%. The yen today gave up an overnight advance against the dollar and turned lower after stocks recovered from early losses and turned higher, reducing safe-haven demand for the yen. Also, higher T-note yields today are undercutting the yen.
The yen today initially moved higher after a slump in global equity markets boosted safe-haven demand for the yen. The yen also found support in today’s Japanese economic news, which showed that Feb labor cash earnings rose more than expected, a hawkish factor for BOJ policy.
The Japan Feb leading index CI fell -0.4 to 107.9, stronger than expectations of 107.8.
Japan Feb labor cash earnings rose +3.1% y/y, stronger than expectations of +3.0% y/y.
June gold (GCM25) today is down -12.70 (-0.42%), and May silver (SIK25) is up +0.810 (+2.77%). Precious metals today are mixed, with gold posting a 3-week low. A recovery in the dollar today is bearish for precious metals. Also, a stock rebound today from early sharp losses has curbed some safe-haven demand for precious metals. In addition, falling inflation expectations are bearish for gold as they curb demand for gold as an inflation hedge after the US 10-year breakeven inflation rate today fell to a 6-1/2 month low. A negative factor for silver prices is the concern that the escalation of the trade war could derail the global economy and the demand for industrial metals.
Precious metals have been supported by the escalation of the trade war, which boosts safe-haven demand for precious metals. Also, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as Israel continues airstrikes across Gaza, ending a two-month ceasefire with Hamas, and as the US continues to launch strikes on Yemen’s Houthi rebels. In addition, the selloff in global equity markets boosted some safe-haven demand for precious metals.
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. For more information please view the Barchart Disclosure Policy here.
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