The dollar index (DXY00) this morning is down -0.28%. An easing of U.S. price pressures that is dovish for Fed policy is weighing on the dollar today after the Jan core PCE deflator rose at the slowest pace in 2-3/4 years. Losses in the dollar accelerated after the Jan MNI Chicago PMI unexpectedly contracted by the most in seven months, and after Jan pending home sales unexpectedly fell by the most in five months. Strength in stocks today has also reduced the liquidity demand for the dollar.
U.S. weekly initial unemployment claims rose +13,000 to 215,000, showing a weaker labor market than expectations of 210,000.
U.S. Jan personal spending rose +0.2% m/m, right on expectations. Jan personal income rose +1.0% m/m, stronger than expectations of +0.4% m/m and the biggest increase in a year.
The U.S. Jan PCE core deflator eased to 2.8% y/y from 2.9% y/y in Dec, right on expectations and the slowest pace of increase in 2-3/4 years.
The U.S. Feb MNI Chicago PMI unexpectedly fell -2.0 to 44.0, weaker than expectations of an increase to 48.0 and the steepest pace of contraction in 7 months.
U.S. Jan pending home sales unexpectedly fell -4.9% m/m, weaker than expectations of an increase of 1.5% m/m and the biggest decline in 5 months.
The markets are discounting the chances for a -25 bp rate cut at 3% for the March 19-20 FOMC meeting and 23% for the following meeting on April 30-May 1.
EUR/USD (^EURUSD) this morning is up +0.09%. The euro rose today on hawkish comments from ECB Governing Council member Holzmann, who said he favors waiting until June for the ECB to begin cutting interest rates. Gains in EUR/USD are limited after German Jan retail sales unexpectedly declined and German Feb CPI eased, dovish factors for ECB policy.
German Jan retail sales unexpectedly fell -0.4% m/m, weaker than expectations of +0.5% m/m.
German Feb unemployment change rose +11,000, showing a weaker labor market than expectations of +5,000. The Feb unemployment rate was unchanged at a 2-1/2 year high of 5.9%, weaker than expectations of 5.8%.
German Feb CPI (EU harmonized) eased to 2.7% y/y from 3.1% y/y in Jan, right on expectations.
ECB Governing Council member Holzmann said he doesn't see any significant talks on lowering borrowing costs before the ECB's policy meeting in June.
Swaps are pricing in the chances for a -25 bp rate cut by the ECB at 4% for its next meeting on March 7 and 22% for the following meeting on April 113
USD/JPY (^USDJPY) today is down by -0.87%. The yen today rallied to a 2-week high against the dollar on hawkish comments from BOJ board member Takata, who said the BOJ's 2% price target is "finally coming into sight," bolstering expectations for the BOJ to end its negative interest rate campaign by as soon as next month. Gains in the gain accelerated today after T-note yields declined. Japanese economic news today was mixed for the yen as Jan retail sales rose more than expected, but Jan industrial production fell more than expected.
Japan Jan retail sales rose +0.8% m/m, stronger than expectations of +0.5% m/m.
Japan Jan industrial production fell -7.5% m/m, weaker than expectations of -6.8% m/m and the biggest decline in 3-1/2 years.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 26% for its next meeting on March 19 and 82% for the following meeting on April 26.
April gold (GCJ4) this morning is up +14.0 (+0.69%), and Mar silver (SIH24) is up +0.225 (+1.00%). Precious metals this morning are moderately higher, with gold climbing to a 3-week high. A weaker dollar today is supportive of metals. Also, lower global bond yields today are bullish for precious metals. Today’s Fed-friendly economic news on Jan core PCE deflator, weekly jobless claims, Jan MNI Chicago PMI, and Jan pending homes sales may push the Fed to cut interest rates and is bullish for precious metals.
On the bearish side, the Jan MNI Chicago PMI unexpectedly contracted by the most in seven months, and Jan pending home sales unexpectedly fell by the most in five months, which are negative factors for industrial metals demand and silver prices. Also, gold remains under pressure from the ongoing long liquidation of gold by funds after long gold holdings in ETFs fell to a 4-year low Wednesday.
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.
