The dollar index (DXY00) today is up by +0.18%. The dollar today is mildly higher after President Trump revealed plans to impose 25% tariffs on all steel and aluminum imports into the US, raising concern that rising tariffs may boost inflation and limit the Fed's ability to cut interest rates. The dollar also has carryover support from last Friday's US payroll report that showed the Jan unemployment rate fell to an 8-month low and Jan average hourly earnings rose more than expected, hawkish factors for Fed policy.
The markets are discounting the chances at 8% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) today is down by -0.11%. The euro is posting modest losses after President Trump announced 25% tariffs on all steel and aluminum imports into the US, which could disrupt global trade and weigh on the Eurozone economy. Losses in the euro were limited after the Eurozone Feb Sentix investor confidence index rose more than expected to a 7-month high.
ECB Vice President Guindos warned that implementation of tariffs by the US would create a "supply shock" that "fundamentally" affects world economic expansion.
The Eurozone Feb Sentix investor confidence index rose +5.0 to a 7-month high of -12.7, stronger than expectations of -16.5.
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) today is up by +0.15%. The yen is under pressure today after the Japan Jan eco-watchers outlook survey unexpectedly fell to an 8-month low. Also, President Trump announced 25% tariffs on all steel and aluminum imports into the US, which undercut the yen. Lower T-note yields today are limiting the downside in the yen. Also, the strength of Japanese government bond yields strengthened the yen's interest rate differentials and supported the yen after the 10-year JGB bond yield rose to a 13-year high today of 1.328%.
The Japan Jan eco-watchers outlook survey unexpectedly fell -0.8 to an 8-month low of 48.0, weaker than expectations of an increase to 49.0.
April gold (GCJ25) today is up +46.00 (+1.59%), and March silver (SIH25) is up +0.232 (+0.72%). Precious metals today are trading higher, with April gold posting a contract high and nearest-futures (G25) gold posting an all-time high of $2,913.20 an ounce. An increase in safe-haven demand pushed precious metals prices higher after President Trump announced tariffs on US steel and aluminum imports. A possible increase in gold demand from China is also boosting gold prices after China announced a pilot program to allow insurance companies to invest as much as 1% of their assets in bullion, which could translate into a potential 200 billion yuan ($27.4 billion) of gold buying. Silver prices have carryover support from today's rally in copper prices to a 4-month high on concern that copper will be included in potential import tariffs threatened by President Trump.
The stronger dollar is a bearish factor for precious metals prices today. Also, today's rally in stocks reduced safe-haven demand for precious metals. Silver prices are also weighed down by concern that additional US tariffs will start a trade war that derails the global economy and the industrial metals demand.
