The dollar index (DXY00) today is down by -0.70%. The dollar is under pressure today as the tit-for-tat trade war with China erodes confidence in the dollar after the US government barred Nvidia from selling its H20 chips to China. The US tariff turmoil diminishes the dollar's reserve-currency status and has prompted some foreign investors to liquidate their dollar assets. Losses in the dollar losses accelerated today after the WTO slashed its 2025 global trade estimate.
US Mar retail sales rose +1.4% m/m, right on expectations and Mar retail sales ex-autos rose +0.5% m/m, stronger than expectations of +0.4% m/m.
US Mar manufacturing production rose +0.3% m/m, stronger than expectations of +0.2% m/m.
The US Apr NAHB housing market index unexpectedly rose +1 to 40, stronger than expectations of a decline to 38.
The World Trade Organization (WTO) cut its 2025 global trade forecast to a -0.2% decline from a November forecast of up +3.0%, and warned if the US pushes ahead with reciprocal tariffs global trade will contract -1.5% this year.
The markets are discounting the chances at 19% for a -25 bp rate cut after the May 6-7 FOMC meeting, down from a 30% chance last week.
EUR/USD (^EURUSD) today is up by +0.66%. The euro today is moderately higher due to weakness in the dollar. Further gains in the euro may be limited came on reports that the EU and US had made little progress in bridging trade differences. Also, expectations for the ECB to cut interest rates by 25 bp at Thursday's policy meeting are bearish for the euro.
Swaps are discounting the chances at 99% for a -25 bp rate cut by the ECB at Thursday's policy meeting.
USD/JPY (^USDJPY) today is down by -0.44%. The yen rallied to a 6-1/2 month high against the dollar today as the tit-for-tat US-China trade war boosts safe-haven demand for the yen after the US government banned Nvidia from selling its H20 chips to China. The yen also garnered support from today's Japanese economic news, which showed that Feb core machine orders rose by the most in a year.
Gains in the yen are limited after Reuters reported that the BOJ will lower its economic growth forecast for the year at the April 30-May 1 policy meeting. Also, comments from BOJ Governor Ueda today weighed on the yen when he said US tariff policy has brought a "bad scenario" to the Japanese economy.
Japan Feb core machine orders rose +4.3% m/m, stronger than expectations of +1.2% m/m and the biggest increase in a year.
Reuters reported that the BOJ is set to cut its economic growth forecasts for the current fiscal year at its April 30-May 1 policy meeting.
BOJ Governor Ueda said US tariffs have brought a "bad scenario" to the Japanese economy that could force the BOJ to make a policy response.
June gold (GCM25) today is up +84.40 (+2.60%), and May silver (SIK25) is up +0.468 (+1.43%). Precious metals today ae sharply higher, with June gold posting a contract high and nearest-futures (J25) gold posting a new record high of $3,312.00 an ounce. Silver prices also rose to a 1-1/2 week high. Today's dollar weakness is bullish for metals.
The escalation of the US-China trade war is also boosting safe-haven demand for precious metals after the US government barred Nvidia from selling its H20 chips to China, and President Trump said he is launching an investigation into the need for tariffs on critical minerals. Precious metals have support as a store of value on expectations for the ECB to cut interest rates by 25 bp at Thursday's policy meeting. Finally, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals after the Israel-Hamas ceasefire broke down and as the US continues strikes on Yemen's Houthi rebels. Fund buying of gold supports prices after long gold positions in ETFs rose to a 1-1/2 year high Tuesday.
