The dollar index (DXY00) today is down by -0.13%. The dollar is under pressure due to President Trump’s announcement Wednesday evening of 25% tariffs on US auto imports, which may undercut US economic growth. The dollar also fell on today's dovish economic news, which showed that US Q4 personal consumption and the Q4 core PCE price index were revised lower. Losses in the dollar were limited by stronger-than-expected US economic news, including the GDP revision, weekly jobless claims, and Feb pending home sales.
US weekly initial unemployment claims fell -1,000 to 224,000, showing a slightly stronger labor market than expectations of an increase to 225,000.
US Q4 GDP was revised upward by 0.1 to +2.4% (q/q annualized), stronger than expectations of no change at 2.3%. Q4 personal consumption was revised downward to +4.0% from the previously reported +4.2%, and the Q4 core price index was revised lower to +2.6% from the previously reported +2.7%.
US Feb pending home sales rose +2.0% m/m, stronger than expectations of +1.0% m/m.
The markets will focus on Friday's Feb personal spending report (expected +0.5% m/m) and the Feb personal income report (expected +0.4% m/m). Also, the Feb core PCE price index, the Fed's preferred inflation gauge, is expected to rise +0.3% m/m and +2.7% y/y. Finally, on Friday, the revised March University of Michigan US consumer sentiment index is expected to remain unchanged at 57.9.
The markets are discounting the chances at 16% for a -25 bp rate cut after the May 6-7 FOMC meeting.
EUR/USD (^EURUSD) today is up by +0.23% after recovering from a 3-week low. Short covering emerged in the euro today on hawkish comments from ECB Governing Council member Wunsch, who said the ECB should consider holding interest rates steady at its next meeting due to US trade policy complications. The euro today was undercut by weaker interest rate differentials as the 10-year German bund yield fell to a 3-week low.
Eurozone Feb M4 money supply rose +4.0% y/y, stronger than expectations of +3.8% y/y and the fastest pace of increase in 2-1/4 years.
ECB Governing Council member Wunsch said the ECB should consider holding interest rates steady at its next meeting due to US trade policy complications.
Swaps are discounting the chances at 75% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is up by +0.22%. The yen today dropped to a 3-1/2 week low against the dollar after President Trump imposed 25% tariffs on US auto imports, which may derail economic growth and keep the BOJ from raising interest rates. Also, higher T-note yields today are weighing on the yen. Losses in the yen are limited after the 10-year Japan JGB bond yield rose to a 16-year high today of 1.596%, strengthening the yen's interest rate differentials.
April gold (GCJ25) today is up +34.00 (+1.12%), and May silver (SIK25) is up +0.478 (+1.40%). Precious metals today are moderately higher, with April gold posting a contract high and nearest-futures (H25) gold posting a record high of $3,061.80 an ounce. Silver also posted a 1-week high. Precious metals jumped today on a weaker dollar and increased safe-haven demand after President Trump expanded tariffs and imposed a 25% tariff on US auto imports. Precious metals also gained after the US 10-year breakeven inflation rate rose to a 1-month high today, boosting demand for precious metals as an inflation hedge. In addition, 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.
Higher T-note yields today are bearish for precious metals. Also, hawkish comments from ECB Governing Council member Wunsch weighed on precious metals when he said the ECB should consider holding interest rates steady at its next meeting. In addition, gains in silver are limited as Wednesday's action from President Trump to impose 25% tariffs on US auto imports threatens to spark a trade war that will derail global economic growth and industrial metals demand.
