The dollar index (DXY00) today is up by +0.28%. The dollar today is moderately higher on improved chances for early action on President Trump’s tax cut plans after House Republicans passed a budget blueprint Tuesday evening. Gains in the dollar are limited after US Jan new home sales fell more than expected. Also, the strength in stocks today has reduced liquidity demand for the dollar.
US Jan new home sales fell -10.5% m/m to 657,000, weaker than expectations of 680,000.
The remainder of this week’s US economic calendar is busy. Thursday’s US Q4 GDP report is expected to show an increase of +2.3% (q/q annualized), with a +4.1% increase in personal consumption. Friday’s Jan PCE price index report, the Fed’s preferred inflation measure, is expected to ease slightly to +2.5% y/y from December’s +2.6%, and the core index is expected to ease to +2.6% y/y from December’s +2.8%. The expected Jan PCE reports of +2.5% nominal and +2.6% core would leave those measures at or above their 3-3/4 year lows posted in 2024 of +2.1% and +2.6%, respectively, and well above the Fed’s +2% inflation target.
The markets are discounting the chances at 2% for a -25 bp rate cut at the next FOMC meeting on March 18-19.
EUR/USD (^EURUSD) today is down by -0.29%, mainly due to the strength of the dollar. The euro also came under pressure today after the German Mar GfK consumer confidence index unexpectedly fell to an 11-month low. Today’s decline in the 10-year German bund yield to a 1-1/2 week low has also weakened the euro’s interest rate differentials. In addition, the prospect for an increase in US tariffs on European goods is also undercutting the euro.
The German Mar GfK consumer confidence index unexpectedly fell -2.1 to an 11-month low of -24.7, weaker than expectations of an increase to -21.6.
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 +0.50%. The yen today is moderately lower as it falls back from Tuesday’s 4-1/2 month high against the dollar. The downward revision to Japan’s Dec leading index CI weighed on the yen. Also, the 10-year Japan JGB bond yield today fell to a 2-week low of 1.320%, which was negative for the yen’s interest rate differentials.
The Japan Dec leading index CI was revised downward by -0.6 to 108.3 from the previously reported 108.9.
April gold (GCJ25) today is up +1.60 (+0.05%), and March silver (SIH25) is up +0.299 (+0.94%). Precious metals prices today are moderately higher as President Trump’s tariff threats boost safe-haven demand for precious metals. Silver also has carryover support from today’s rally in copper prices to a 1-1/2 week high after President Trump signed an executive order Tuesday evening directing the Commerce Department to examine possible tariffs on US copper imports. Gains in metals are limited today by a stronger dollar. Also, stock strength today has curbed some safe-haven demand for precious metals.
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.
