Dollar Under Pressure from Strength in Stocks

The dollar index (DXY00) this morning is down by -0.10%.  Strength in stocks today has curbed liquidity demand for the dollar.  Today’s US economic news was mixed for the dollar after capital goods orders rose more than expected, but consumer confidence unexpectedly declined.

US Feb capital goods new orders nondefense ex-aircraft and parts rose +0.7% m/m, stronger than expectations of +0.1% m/m.

The US Jan S&P Core Logic composite-20 home price index rose +6.03% y/y, the largest increase in 14 months.

The Conference Board US Mar consumer confidence index unexpectedly fell -0.1 to a 4-month low of 104.7, weaker than expectations of an increase to 107.0.

The US Mar Richmond Fed manufacturing survey unexpectedly fell by -6 to -11, weaker than expectations of no change at -5.

The markets are discounting the chances for a -25 bp rate cut at 13% for the next FOMC meeting on April 30-May 1 and 76% for the following meeting on June 11-12.

EUR/USD (^EURUSD) today is up by +0.108%.  Today’s dollar weakness is supportive of the euro. Also, today’s stronger-than-expected German Apr GfK consumer confidence was positive for EUR/USD.  Gains in the euro were limited by dovish comments from ECB Governing Council member Muller, who expressed confidence that the ECB can start cutting interest rates in June.

The German Apr GfK consumer confidence index rose +1.4 to -27.4, stronger than expectations of -28.0.

ECB Governing Council member Muller said data over the coming weeks may be sufficient to confirm the slowdown in inflation by the time ECB policymakers set borrowing costs in June.

Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 11% for its next meeting on April 11 and 94% for the following meeting on June 6.

USD/JPY (^USDJPY) this morning is slightly lower.  Comments today from Japanese Finance Minister Suzuki today supported the yen when he warned that Japanese authorities “would take the appropriate steps” against excessive currency moves, bolstering speculation that Japan is close to intervening in currency markets to support the yen. Higher T-note yields today are limiting the upside in the yen.

Japan Feb PPI services prices were unchanged from Jan at +2.1% y/y, which was right on expectations.

Japanese Finance Minister Suzuki said the Japanese government will take appropriate steps against excessive currency moves without ruling out any measures.

Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 2% for the April 26 meeting and 38% for the following meeting on June 14.

April gold (GCJ4) this morning is up +9.9 (+0.45%), and May silver (SIK24) is down -0.116 (-0.47%).  Precious metals this morning are mixed.  A weaker dollar today is supportive of metals.  Gold is also moving higher on comments from ECB Governing Council member Muller, who expressed confidence the ECB can start cutting interest rates at the June meeting.  Geopolitical tensions in the Middle East are also boosting safe-haven demand for precious metals after talks for a cease-fire between Israel and Hamas stalled.

On the negative side for precious metals is today’s increase in T-note yields.  Also, strength in stocks today has reduced safe-haven demand for precious metals.  Silver prices gave up early gains and turned lower on negative carryover from a slide in copper prices today to a 1-1/2 week low.

More Precious Metal News from Barchart

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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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