The dollar index (DXY00) today is down by -0.95%. Today's strength in EUR/USD is undercutting the dollar as stronger-than-expected Eurozone economic news boosted European government bond yields. The dollar extended its losses on weaker-than-expected US ISM and construction spending reports.
The US Feb ISM manufacturing index fell -0.6 to 50.3, weaker than expectations of 50.7. The Feb ISM prices paid sub-index rose +7.5 to a 2-1/2 year high of 62.4, stronger than expectations of 56.0.
US Jan construction spending fell -0.2% m/m, slightly weaker than expectations of -0.1% m/m and the biggest decline in 4 months.
Market attention this week will focus on Wednesday’s Feb ISM services index (expected -0.1 to 52.7). On Friday, Feb nonfarm payrolls are expected to rise by +160,000, and the Feb unemployment rate is expected to remain unchanged at 4.0%. Meanwhile, Feb average hourly earnings are expected to be unchanged from Jan at +4.1% y/y. Also on Friday, Fed Chair Powell gives the keynote speech on the economic outlook at Chicago Booth’s 2025 US Monetary Policy Forum.
The markets are discounting the chances at 9% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) today is up by +1.14%. The euro is climbing today after stronger-than-expected Eurozone economic news on Feb CPI and Feb manufacturing activity boosted European government bond yields to 1-week highs, strengthening the euro’s interest rate differentials. The euro and bond yields also rose amid signs the Eurozone is headed toward increased defense spending that will most likely be funded by higher debt issuance after UK Prime Minister Starmer said Britain, France, and “one or two others” would work with Ukraine on a plan to stop the war with Russia and to assemble a “coalition of the willing” to secure Ukraine.
Eurozone Feb CPI rose +2.4% y/y, stronger than expectations of +2.3% y/y. Feb core CPI rose +2.6% y/y, stronger than expectations of +2.5% y/y.
The Eurozone Feb S&P manufacturing PMI was revised upward by +0.3 to 47.6, stronger than expectations of no change at 47.3.
Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at the March 6 policy meeting.
USD/JPY (^USDJPY) is down by -0.25%. The yen today recovered from a 1-week low against the dollar and is moderately higher. Short covering emerged in the yen today after weaker-than-expected US economic reports knocked the dollar and T-note yields lower. Also, comments from Japan's top currency official, Atsushi Mimura, supported the yen when he said Japan needs to be cautious about movements in exchange rates. Today’s +1.70% rally in the Nikkei Stock Index curbed some safe-haven demand for the yen.
The Japan Feb Jibun Bank manufacturing PMI was revised upward by +0.1 to 49.0 from the previously reported 48.9.
Japan's top currency official, Atsushi Mimura, said Japan needs to be cautious about movements in exchange rates, as they can have a negative impact on achieving real wage gains.
April gold (GCJ25) today is up +44.20 (+1.55%), and May silver (SIK25) is up +0.854 (+2.71%). Precious metals prices are climbing today due to a weaker dollar. Also, there is safe-haven demand for precious metals as the Trump administration’s increased tariffs on US imports from Canada, Mexico, and China are set to begin on Tuesday. Fund buying is also supporting gold prices as long gold positions in ETFs rose to a 14-month high last Friday. Silver prices garnered support from today’s news that of stronger-than-expected manufacturing activity in China, Japan, and the Eurozone, which is positive for the demand for industrial metals.
