The dollar index (DXY00) Monday rose by +0.26%. The dollar on Monday recovered from early losses and turned higher after T-note yields rebounded from losses and moved higher, strengthening the dollar's interest rate differentials. Also, hawkish comments from Fed Governor Kugler supported the dollar when she said inflation concerns from tariffs are more pressing than economic growth concerns.
The dollar today initially moved lower because of concerns that the escalating global trade war would derail the economy and force the Fed to cut interest rates. The dollar is also facing a confidence crisis as the US renegotiates its relationships with its trading partners, diminishing the dollar's reserve-currency status and prompting some foreign investors to liquidate their dollar assets.
US Feb consumer credit unexpectedly fell -$0.810 billion, weaker than expectations of an increase of +$15.000 billion.
Fed Governor Kugler said, "Inflation is being more pressing as far as the effects of tariffs that we're already seeing" than for economic growth.
The markets are discounting the chances at 43% for a -25 bp rate cut after the May 6-7 FOMC meeting.
EUR/USD (^EURUSD) Monday fell by -0.16%. On Monday, the euro gave up an early advance and posted moderate losses as a rebound in the dollar sparked long liquidation in the euro. Also, weaker-than-expected Eurozone economic news Monday weighed on the euro after Eurozone retail sales rose less than expected, and the Eurozone Apr Sentix investor confidence index fell more than expected to a 1-1/2 year low.
Eurozone Feb retail sales rose +0.3% m/m, weaker than expectations of +0.5% m/m.
The Eurozone Apr Sentix investor confidence index fell -16.6 to a 1-1/2 year low of -19.5, weaker than expectations of -9.0.
German Feb industrial production fell -1.3% m/m, weaker than expectations of -1.0% m/m.
Swaps are discounting the chances at 89% for a -25 bp rate cut by the ECB at the April 17 policy meeting.
USD/JPY (^USDJPY) Monday rose by +0.46%. The yen on Monday gave up an overnight advance against the dollar and turned lower after stocks recovered from early losses and turned higher, reducing safe-haven demand for the yen. Losses in the yen accelerated Monday after T-note yields recovered from early losses and moved higher.
The yen on Monday initially moved higher after a slump in global equity markets boosted safe-haven demand for the yen. The yen also found support in Monday's Japanese economic news, which showed that Feb labor cash earnings rose more than expected, a hawkish factor for BOJ policy.
The Japan Feb leading index CI fell -0.4 to 107.9, stronger than expectations of 107.8.
Japan Feb labor cash earnings rose +3.1% y/y, stronger than expectations of +3.0% y/y.
June gold (GCM25) Monday closed down -61.80 (-2.04%), and May silver (SIK25) closed up +0.374 (+1.28%). Precious metals on Monday settled mixed, with gold posting a 3-week low. A recovery in the dollar on Monday weighed on precious metals. Also, a stock rebound Monday from early sharp losses has curbed some safe-haven demand for precious metals. In addition, falling inflation expectations are bearish for gold as they curb demand for gold as an inflation hedge after Monday's US 10-year breakeven inflation rate fell to a 6-1/2 month low. A negative factor for silver prices is the concern that the escalation of the trade war could derail the global economy and the demand for industrial metals.
Precious metals have been supported by the escalation of the trade war, which boosts safe-haven demand for precious metals. Also, geopolitical risks in the Middle East are boosting safe-haven demand for precious metals as Israel continues airstrikes across Gaza, ending a two-month ceasefire with Hamas, and as the US continues to launch strikes on Yemen's Houthi rebels. In addition, the selloff in global equity markets boosted 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.
