The dollar index (DXY00) today is down by -0.31% at a 4-month low. The dollar has fallen every day this week and remains under pressure due to the negative impact of US tariffs on the US economy. Losses in the dollar accelerated today on the dovish US Feb payroll report that showed nonfarm payrolls and average hourly earnings rose less than expected, and the unemployment rate unexpectedly moved higher. Losses in the dollar are limited due to hawkish comments from Atlanta Fed President Bostic that suggest he favors holding monetary policy steady for the foreseeable future.
For the rest of this week, market attention will focus on Fed Chair Powell’s keynote speech on the economic outlook later today at Chicago Booth’s 2025 US Monetary Policy Forum.
US Feb nonfarm payrolls rose +151,000, weaker than expectations of +160,000, and Jan nonfarm payrolls were revised lower to +125,000 from the previously reported +143,000. The Feb unemployment rate unexpectedly rose +0.1 to 4.1%, showing a weaker labor market than expectations of no change at 4.0%.
US Feb average hourly earnings rose to 4.0% y/y from a revised 3.9% y/y in Jan, weaker than expectations of 4.1% y/y.
Atlanta Fed President Bostic said Thursday evening that the direction of the economy is “very much up in the air,” and it could be several months before there’s clarity on how President Trump’s policies and other factors will affect the economy, suggesting he favors holding interest rates steady until at least late spring.
The markets are discounting the chances at 4% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) today is up by +0.69% at a new 4-month high. Today’s dollar weakness is a positive factor for the euro. Also, the upward revision to Eurozone Q4 GDP is bullish for EUR/USD. The euro added to its gains today on hawkish comments from ECB Governing Council member Muller who said, “The ECB needs to be increasingly cautious about further interest rate cuts.” Today’s weaker-than-expected German Jan factory orders report was a bearish factor for the euro.
Eurozone Q4 GDP was revised upward to +0.2% q/q and +1.2% y/y from the previously reported +0.1% q/q and +0.9% y/y.
German Jan factory orders fell -7.0% m/m, weaker than expectations of -2.5% m/m and the biggest decline in a year.
ECB Governing Council member Muller said, “The ECB needs to be increasingly cautious about further interest rate cuts as several factors, such as tariffs or the impact of defense spending, could accelerate price increases in the near future.”
Swaps are discounting the chances at 63% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) today is down by -0.32%. The yen climbed to a new 5-month high against the dollar today. The yen has positive carryover support from Thursday when Japan’s largest labor union demanded the biggest wage increase since 1993, which may prompt the BOJ to keep raising interest rates. Today’s fall in T-note yields is also bullish for the yen. However, gains in the yen are limited due to a Bloomberg report that said the BOJ favors keeping interest rates steady at this month’s policy meeting.
Bloomberg reported that BOJ officials are leaning toward keeping interest rates unchanged at the March 18-19 policy meeting as growing uncertainties in the global economy require close attention.
April gold (GCJ25) today is up +7.80 (+0.27%), and May silver (SIK25) is down -0.218 (-0.65%). Precious metals prices today are mixed. Weakness in the dollar is bullish for precious metals prices as the dollar index fell to a 4-month low today. Also, the ongoing safe-haven demand for precious metals remained strong after US tariffs went into effect on Tuesday against Canada, China, and Mexico, and Canada and China retaliated with their tariffs on US goods. In addition, fund buying supports gold prices as long gold positions in ETFs rose to a 15-month high Thursday.
Hawkish central bank comments are negative for precious metals prices today after Atlanta Fed President Bostic said he favors holding interest rates steady until at least late spring, and ECB Governing Council member Muller said, “The ECB needs to be increasingly cautious about further interest rate cuts.” Also, falling inflation expectations are curbing demand for precious metals as an inflation hedge after the US 10-year breakeven inflation rate fell to a 2-1/4 month low today. Silver prices are also under pressure because of the concern that US actions to impose tariffs will lead to a global trade war that undercuts economic growth and industrial metals demand.
